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2012 Warehouse/DC Operations Survey: Mixed signals

A record response reveals that readership is divided in terms of investment: One side remains cautious, while the other is on the verge of making significant changes to their warehouse/DC operations.
By Maida Napolitano, Contributing Editor
November 01, 2012

The multi-channel effect
For the first time, we decided to track how companies use market channels—or how they make product available to their customers.

Most of the respondents (84%) report servicing more than one channel: 67% report shipping to wholesalers; 57% to retailers; and 29% are e-commerce based, shipping products directly to customers.

“I would be most interested in tracking e-commerce penetration over the coming years,” says Derewecki. “It seems that despite what industry our clients are in, if they are not using the Internet now, they have a plan to get into it.” He notes that more consumers are now using brick-and-mortar stores merely as “showrooms” to see a particular model, confirm its looks and functions, but then head back home to compare costs among web retailers before ordering that model online. 

How are multi-channel respondents fulfilling their orders? Forty percent are filling their orders themselves from one main DC, designating separate areas for retail or e-commerce or scheduling specific pick waves for certain channels. “Almost 25% of respondents have already decided to put it in a separate DC,” notes Saenz. “It would be interesting to see how these results change as each channel grows. I predict more separate DCs and the use of more third-party logistics providers.”

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2012 DC network profile
The profile of this year’s distribution network remains mostly the same as the past few years.

Sixty percent of respondents operate less than 250,000 square feet of space in their distribution network, with most common clear heights of 20 to 29 feet. Derewecki predicts that, over time, the mix is going to shift toward taller, higher buildings. “Lift truck technology is making higher buildings very practical,” he says. “Newer, double-deep reach trucks, for example, can lift to a height of over 36 feet.” 

Seventy percent of respondents report undertaking some kind of distribution network optimization and location studies, mostly on an “as-needed” basis. As a result of these studies, half of respondents (50%) report “moving inventory among warehouses” as it is the easiest and quickest option among all the other network improvement actions. For those adding DCs as a result of these studies, most cite “improved customer service” (70%) and “the penetration of new markets” (36% ) as their top two drivers.

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Tracking previous trends
Recycling continues to dominate sustainability efforts at 76%. This year however, slightly more respondents are “reusing shipping containers” and “using metal and/or plastic pallets.”

Derewecki notes that he’s seeing more plastic pallets in use at pharmaceutical manufacturing because of FDA requirements. “Wherever you have a requirement of a sterile or cleanroom environment, then that’s one good way you can use reusable plastic pallets.”

Fortunately, fewer respondents (only 15% versus last year’s 28%) experienced catastrophic events this year compared to last year. Open-ended responses show many operations being hit by hurricanes and tornadoes; but to protect against these particular threats, survey takers have installed back-up generator and data retrieval systems, set plans in place to re-route demand to another DC, and have established multiple sources for parts and raw materials.

To reduce operating costs, “improving warehouse processes” (64%) and “improving inventory control” (61%) remains the top two actions preferred most by respondents. “It makes sense because both do not necessarily involve a high level of investment,” says Derewecki. “However, the better operators have already done all the process improvements that they can do without making capital investments. They are at the next stage. To improve, they may need to invest in mechanization and automation.”

About the Author

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Maida Napolitano
Contributing Editor

Maida Napolitano has worked as a Senior Engineer for various consulting companies specializing in supply chain, logistics, and physical distribution since 1990. She’s is the principal author for the following publications: Using Modeling to Solve Warehousing Problems (WERC); Making the Move to Cross Docking (WERC); The Time, Space & Cost Guide to Better Warehouse Design (Distribution Group); and Pick This! A Compendium of Piece-Pick Process Alternatives (WERC). She has worked for clients in the food, health care, retail, chemical, manufacturing and cosmetics industries, primarily in the field of facility layout and planning, simulation, ergonomics, and statistic analysis. She holds BS and MS degrees in Industrial Engineering from the University of the Philippines and the New Jersey Institute of Technology, respectively. She can be reached at .(JavaScript must be enabled to view this email address).


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