Identify yard management’s operational costs

Yard management systems (YMS) can be a key contributor to operational efficiency. However, making best use of them requires an understanding of direct and indirect costs.

By Tom Andel, Editor in chief -- Modern Materials Handling, 8/27/2007

Yard management systems (YMS) can be a key contributor to operational efficiency. However, making best use of them requires an understanding of direct and indirect costs.

Mike Pujda, project manager with Tompkins Associates, Raleigh, NC-based supply chain consultants, says the most common mistake companies make when applying YMS is gathering information at too high a level in their organization. In an article appearing in Tompkins’ SupplyChainEdge newsletter, Pujda suggests you understand current processes, why they are performed, and the direct and indirect costs associated with them.

Direct costs include:

• Yard jockey (operator of the yard tractor) wages
• Yard check wages
• Yard truck maintenance
• Detention/demurrage fees
• Non-use fees
• Spoilage and expiration of perishable products
• Direct two-way communication wages

Indirect costs include:

• Lost sales
• Warehouse waiting time
• Excess inventory investment.

Wait—shouldn’t warehouse waiting time be considered a direct cost?

“Warehouse resources can usually be deployed to other tasks to fill the time it takes to replace a trailer at the dock,” Pujda explains. “It takes time to swap trailers at a dock door; therefore, the warehouse processes should be designed around this operational fact. The indirect cost comes into play when an excessive amount of time is taken due to inefficiencies in a direct cost component.”

In fact, developing requirements for a YMS can be a good way to take inventory of your materials handling processes overall.

“When you understand your yard processes, you can make sure you keep the processes that add value while looking to improve their efficiency,” he says. “Identify the processes that could be improved and get a fair idea how much improvement may be possible for what cost. Keep in mind that you’re not selecting a solution; you’re validating your views on what YMS can do for you.”