Famous for its Mardi Gras, jazz, and Creole and Cajun foods, New Orleans is also known as "The Big Easy." Warehousing topics, however, were big in this city in late April when WERC, the Warehousing Education and Research Council, held its 24th annual convention there.

Some of the high notes from the event include:

• Why companies decide to manage their own warehouses.
• What third-party logistics (3PL) providers are doing to deal with postponement and distribution consolidation.
• Where crossdocking fits today.
• When to move to product slotting (see Click on ).

At this point, much is known about the what, where, when, and why of public or 3PL logistics warehouses. Together, 3PLs gross about $20 billion a year in the U.S. in value-added warehousing, says Richard Armstrong, president, Armstrong & Associates. Add to that total the billions of dollars in revenues from outsourced or contract carriage, transportation management, freight forwarding, and software, and the 3PLs' total gross is over $56 billion, he adds.

Yet there's a "black hole of virtually no information" when it comes to private warehouse and distribution facilities, say university professors Dr. Thomas Speh (Miami of Ohio) and Dr. Arnold Maltz (Arizona State).

It's generally agreed, the professors add, that private sector facilities account by far for more warehouse space occupied and billions of dollars spent compared to 3PLs. Very, very roughly, the private sector amounts to somewhere between 60% and 80% of all warehousing activity, they estimate.

Attempting to pour data into the black hole, Drs. Speh and Maltz and their graduate students recently studied 50 private firms – organizations large enough to be operating multiple warehouses. WERC is sponsoring their research.

Even among these 50 operations, not everything runs as private warehousing, however. Eighty-four percent of their volume is handled privately while 16% is in the hands of 3PLs. For the future, 30% of the 50 operations surveyed say they will have more private warehouses, 18% will have fewer, and 52% will keep the status quo.

Tables on the next page of this story show how the 50 say they spend their capital dollars, which of their activities require the most labor, and how their space is utilized.

Why do companies decide to manage their own warehouse operations? Twenty-four percent of respondents rated "control of warehouse service" as either the "most important" or "second most important" factor. Having the "warehouse vitally connected to marketing efforts" was checked off by 14%. Meanwhile, 13% said they choose private warehousing because it is lower cost than 3PL. Other answers and their percentages: (a)"Warehousing is a core competency," 11%; (b)"Our employees are more responsive," 6%; and (c)"Our warehousing/shipping is too complicated to outsource," 6%.

Last year's WERC annual conference offered examples of outsourcing to 3PLs (see click ons). Similarly, this year's seminars explored issues of when and how to contract out warehousing and related activities. One potentially outsourced activity is postponement.

Postponement requires the third-party warehouse to hold products in generic form until the customer places an order, then complete assembly or manufacture at the 3PL, and finally shipment to the customer.

Tapping into a third-party provider for postponement, says Tom Coddington, a regional vice president for the 3PL firm USCO Logistics, puts a new spin on the old adage, "Why put off until tomorrow what you can do today?" In effect, this question changes to this one: "Why not ask a 3PL to put off my final assembly until tomorrow (when the order is placed) so that I can realize inventory savings today?"

According to Coddington, big dollar savings can result for the manufacturer from inventory reduction and its associated costs.

For instance, Rheem, the water heater manufacturer, now uses USCO Logistics for final, postponed assembly and shipping of its products.

Previously, Rheem shipped factory direct to customers. That meant inventorying 120 SKUs (stockkeeping units), many of which were nearly identical.

For faster customer response, however, Rheem now warehouses basic, generic water heater models at USCO Logistics' facilities. By installing heating elements in generic products and adjusting them for different voltages and wattages, the 3PL custom configures heaters to UL-certification specs and to the specific SKU ordered.

Product cycle time has been cut from weeks to hours, says Coddington. Rheem's market share is up, moreover. Meanwhile its inventory carrying costs are down 10%, the USCO exec adds. "Incorporating the postponement model within a shared warehouse network allowed Rheem to move consumer product closer to the customer," he notes.

Consolidation of distribution is another reason to use a 3PL according to Cummins Engine, Kenco Logistic Services, and Ryder (see Click on).

Crossdocking is an old tool in warehousing, acknowledges Geoffrey Sisko, vice president, Gross & Associates. Crossdocking takes received product and moves it to the shipping dock without entering long-term storage.

Nevertheless, there are some new constraints on warehouses and new opportunities that may make it worthwhile to reexamine how this tool gets used, Sisko suggests. Included among these newer constraints are supply chain management programs, which require faster cycle times, and just-in-time requirements as well as B2C and B2B e-commerce operations, which increase demands to move items into and out of a DC very quickly.

Better systems of information exchange, including the Internet, and improved supply chain software to manage all the data now offer increased opportunities to crossdock, Sisko points out. "Knowledge is the key to crossdocking effectively by matching demand to supply," he adds.

Crossdocking can pay off big. But with which kinds of products does it work best? By product type, the most likely candidates are those items that have high cubic volume, are popular, and their demand is highly predictable.

WERC was big in "The Big Easy" as noted above. We've played only a few bars from a few sets in this "jazz performance." For more, contact the association at www.werc.org for post-conference information and to order cassette tapes of individual seminars.

Click on this icon for more details on the WERC private warehousing study, crossdocking, and tips on slotting.