Benchmarking survey reveals distribution trends

Less packaging, more value-added services and more crossdocking are among the trends noted in a recent Supply Chain Consortium report.

By Corinne Kator, Associate Editor -- Modern Materials Handling, 3/28/2008

Distribution centers are reducing their use of packaging material, devoting additional space to value-added services and relying more on crossdocking than ever before. Those are three of the trends Bruce Tompkins, executive director of the Supply Chain Consortium, notes in his “2008 Core Benchmarks Report.”

The report is based on survey responses from members of the Supply Chain Consortium, a group of retailers and manufacturers who work together to rate their supply chain operations.

Trend 1: Reducing packaging

The report shows paper material and plastic airbags are the most common forms of protective packaging used in Supply Chain Consortium member DCs. It also notes a significant decrease in spending on packaging material in the last year.

“We could definitely see a trend in 2007 compared to previous years’ surveys of people using less and less material—and using less expensive material when they are using packaging,” says Tompkins.

For environmental and for economic reasons, he says, “companies are using more creative means for protecting their products instead of just throwing money at packaging.”

Trend 2: More value-added services

While DCs are doing less of their own packaging, they’re doing more of their customers’ kitting, price labeling and display building. These and other value-added services (VAS) are clearly on the rise, says Tompkins.

From making products store-ready to adding RFID tags, he says, “people are doing things now in their DCs that they never dreamed they’d be doing in their DCs.” And while this work eats up valuable resources, he says, “they’ve got to do it because that’s what the customer wants.”

Most VAS require a lot of space, he adds, “and almost nobody has cash around to build a new facility, so the question they’re asking is ‘how do we get more done in the facility we already have?’”

Some of his answers:

• Increase inventory efficiency to free up storage space for VAS
• Add mezzanines to take advantage of vertical space
• Keep DC layouts flexible so it’s easier to take on new VAS when customers ask for them

Trend 3: Less picking, more crossdocking

Another DC activity on the rise among Supply Chain Consortium members is crossdocking. “Clearly, pick-from-stock is the predominant process in use,” says the report, but 6% of manufacturers’ inbound shipments and 24% retailers’ inbound shipments are being handled by less labor intensive crossdocking or flow-through processes, and Tompkins believes these numbers will continue to rise.

“More and more people are understanding the value of setting up a facility for crossdocking,” he says, “and more and more people have the technology to do it.”

Successful crossdocking, he says, requires a DC with the proper layout and lots of doors, good data about inbound and outbound shipments, and software that can process and match up that data.