From Sow’s Ear to Silk Purse

Turning adversity into opportunity is standard practice for logistics professionals, but it seems everyone is taking that approach in today’s economic climate.

Like most businesses, warehouses and third-party logistics providers (3PLs) are feeling the pinch. The part of their business based on creating value for customers, and sharing in that, is doing OK. But for many, the transaction part of the business model is hurting. When shipments are down, inventory moves haltingly or is non-existent, and cash doesn’t flow. Even those companies doing well are troubled by projections such as this: “Warehouse vacancy is up sharply and is poised to move into the double digits for the first time since the mid 1990s,” according to CoStar Group, which tracks industrial real estate trends.

That adversity creates an opportunity for you to put your logistics partner to work making your logistics network more efficient. You’ll gain solutions flexibility, expert bandwidth, and lower warehouse space costs, which can enable you to hold more inventory if needed. Here are some examples of 3PLs working to make a silk purse from a sow’s ear:

• Warehouse Specialists Inc. (WSI), a 3PL based in Appleton, Wisc., serves an industrial manufacturer customer that wanted to streamline its entire network. WSI went the distance, eliminating a warehouse location and replacing it with a cross-dock. Naturally, WSI passed those savings back to the customer, but that win was augmented by better load optimization. Trucks that previously left the dock with 32,000-pound loads now topped out at 42,000 pounds—for a monthly transport cost reduction of $8,000.
• Kenco Logistic Services, Chattanooga, Tenn., recently launched an efficiency improvement program across more than 1.5 million square feet of space. Its goal was to get back to basics and wring out every bit of warehouse operations costs to keep the edge in this tight economy. Part of Kenco’s initiative included compensating employees with up to $500 each for site improvements. That internal drive for efficiency benefited customers because Kenco was happy to pass along savings it gained by reducing non-value-added activities and increasing performance by five percent.
• Los Angeles-based 3PL Weber Distribution ventured into a new solutions area—product assembly—for one customer. Weber’s supply chain expertise got the customer’s attention for its new product assembly project, and the net result included assembly cost savings, a cut in inbound transport costs, and even a reduction in expedited outbound transport costs.

There are many more examples of turning economic adversity into economic opportunity, and you will find them in this and future issues of Inbound Logistics. If you can provide an example from your operation, we’d like to hear about it. Please e-mail: [email protected].