Finding Quality Warehouse Space When Space is Limited

Finding quality warehouse space can be difficult.  Oftentimes companies spend too much time and resources searching for warehousing providers that meet their ever-changing needs. To complicate matters, most logistics managers do not have the expertise or an established network of outside warehouses to do so efficiently.

With constantly changing storage requirements, companies need an efficient way to manage their outside warehouse networks including food safety requirements, insurance coverage, rate negotiations, and transportation. One solution to finding quality storage space when space is limited it to utilize a managed warehouse service provider. Utilizing a managed warehouse service provider can deliver value through:

Simplified operations—Companies who provide managed warehouse services will essentially manage all of your outside warehouse relationships. This will leave you with just one invoice to pay for your entire network of suppliers.

Established Networks— A managed warehouse service provider will have a vast database of warehouses in various locations.  They have already built relationships with these providers and have verified them for quality.

Team of Experts—Companies who provide managed warehouse services will have a trained team of experts in operations, engineering, warehouse legal liability, rate negotiations and food safety requirements. This is something most companies simply do not have in-house.

Reduced Risk—When you work with a managed warehouse service provider, you’ll have access to warehouse legal expertise that can protect your products from being lost, stolen or damaged, which requires an understanding of loss limits and insurance coverage.

Standard operating procedures (SOP)—A managed warehouse service provider will have SOPs to address food safety and FSMA requirements for outside warehouses. Their network of storage providers will be trained on these SOPs to ensure the integrity of your products.

When warehousing is outside of a company’s core business, it makes it difficult to find the time, resources, and expertise to efficiently manage everything that goes into locating and managing outside storage networks. Enlisting the help of a managed warehouse service provider can allow companies to focus on their business, while saving time and reducing risk.

Know Your Supply Chain Terms

When it comes to warehousing and logistics, it can seem like those in the business are speaking another language. However, familiarizing yourself with a few of the basic terms will help increase your understanding of supply chain operations.

Below are a number of phrases to build your supply chain knowledge base.

• KPI. Key Performance Indicator. This is a pre-established standard or standards used to gauge the performance of a supply chain.

• WMS. Warehouse Management System. A program that manages inventory and tracks inbound and outbound transactions, effectively managing and recording day-to-day operations.

• EDI. Electronic Data Interchange. This is a communication method that allows companies to exchange data through a standardized format. EDI helps streamline logistics by allowing computers, utilizing different systems, to talk to each other.

• TMS. Transportation Management System. This system pulls together all elements of shipping loads, helping automate processes and make cost effective decisions in planning transportation.

• BOL. Bill Of Lading. A BOL is the declaration of content within a shipment provided by a shipper to the carrier.

• MHE. Material Handling Equipment. MHE refers to lift trucks, reach trucks, etc. used in a warehouse for unloading stock or picking items for delivery.

• FTE. Full Time Equivalent. A unit of measurement for an operation that denotes one full-time employee.

• OTIF. On-Time, In Full. This is a type of KPI that looks at shipping performance.

• OS&D. Over, Short, & Damaged. A report, normally filed by the receiver of a shipment, that details product quantity or damage issues.

• LMS. Labor Management System. A system the tracks and reports on the productivity of a workforce.

• RF. Radio Frequency. RF barcode scanning is used for warehouse location signs to increase accuracy and speed in inventory management, including put away and picking functions.

• 3PL. Third Party Logistics. A 3PL provides logistics management services to shippers (vs. companies taking on these tasks in-house), which enables companies to focus more on their core competencies. 

NFDM Prices Present Significant Profit Opportunity

Lower your production costs and your profits will increase. This is why companies do all they can to leverage the best prices on raw materials.

Food product manufacturers are doing this today, taking full advantage of Non-fat Dairy Milk (NFDM) powder prices that are at five-year lows. This low point is an opening for companies to utilize an asset-based line of credit to stockpile the commodity. But food product manufacturers aren’t the only ones who can benefit.

The down market also presents a fantastic opportunity for savvy NFDM manufacturers and traders to hedge. Given the right financing terms, setting aside product now for a later sale can pay significant dividends in the months ahead.

Consider this scenario. Powder is selling today for roughly $1 per pound. Let’s say a company was able to secure advantageous finance terms, which came out to $.02 per pound every three months. If the price of NFDM were to increase to $1.15 in three months, that’s $.13 of profit per pound.

Now what if NFDM rallied within a year to its 3-year average of $1.60? Subtract the $1.08 in finance costs, and the profit becomes $.52 per pound.

All of this depends on a financing mechanism that not only gives companies highly competitive rates, but also is agile enough to put them in a hedging position now, while the market is at a low point. The old adage holds true – time is money.

What Is Contract Operations And What Value Does It Bring?

There is a difference between getting things done and getting them done efficiently. One example is running a distribution center in-house. Because the operation appears to run with no major roadblocks, many companies aren’t aware of their true costs and don’t focus the time or resources to drive out inefficiencies and unnecessary expense. This results in a distribution center that is operating sub-optimally and negatively impacting the company’s bottom-line profit. Additionally, allocating resources to an in-house distribution center only diverts attention from the company’s core competencies, priorities, and business purpose.

Turning over distribution center operations to a third party can often reduce costs, improve operational performance, and customer satisfaction, and ultimately help companies better focus on their business priorities.

Use the topics below to determine if your company could benefit from a contract operation.

• Staff recruiting and management. Is recruiting, training and managing warehouse staff an effective use of company time? Could that time be better focused on the company’s core competency.

• Upfront investment. Purchase of racking and material handling equipment is expensive. What is the lost-opportunity cost to tying those dollars up in a major capital purchase? Could they be better deployed in other areas of the business?

• Layout and design. Is your warehouse designed to perform? The efficiency of a distribution center is determined before the first loads are moved. Make the wrong decisions on layout, racking, and design, and the inefficiency will burden a company with overtime and additional personnel costs.

• Management systems. Distribution is driven by big data. Does your facility have the systems in place to collect it? Do you know what the data means and how to act on it? Without a quality warehouse management system, companies operate in a vacuum. Real-time access to this information is critical to the overall performance of the facility and, ultimately, customer satisfaction.

Protecting Your Inventory from Unwanted “Consumers”

Pest control. It’s a topic you simply can’t ignore when selecting a warehouse or 3PL partner. Whether it flies, crawls, or burrows, pests are a constant threat, especially to facilities storing food-grade products. Without the proper procedures in place, this can mean big problems for your stored product.

Before trusting your inventory to a warehousing provider, ask the questions below to ensure that your products are in good hands.

• What inspections take place around pest control? It is important to work with a facility that goes beyond regular checks on interior and exterior traps. Make sure the actual product is being examined, as well as the tops and sides of pallets, for any pest activity. Some facilities will take extra measures, such as using pheromone traps, to make sure nothing was missed during regular inspections.
• How often are the inspections conducted? A reputable warehouse will have a pest control professional visit at least once a week. Additionally, the warehouse itself should have staff perform detailed inspections during inbound, outbound, and storage processes to ensure product is pest-free at all stages.
• What is the audit process to ensure their pest control vendor is doing their job? Make sure that your warehousing provider does random checks on traps, pallets, etc. directly following an inspection by their vendor. This will reveal if the vendor is doing a thorough job.
• What is the corrective action when pests or pest evidence is found?  Corrective actions are all dependent on the situation. Give a potential warehousing provider a pest related scenario and confirm they can provide a suitable plan of action. 
• How are live insects handled when found? In the event that live insects are found, your warehousing provider should have their pest management company come in to do fumigation or fogging upon your approval. 

What Is The Value Of In-The-Box Engineering?

A successful building project goes way beyond just creating a structure. Many decisions must be made throughout the process – some of which could make or break the overall efficiency of an operation.

The weight of these decisions can be eased by enlisting the help of an engineer who truly understands warehousing. An engineer can ensure your new facility operates at maximum efficiency by offering insight on the subjects listed below. 

• Warehouse design. Design is the single most important phase of any construction project. Engineers can focus on long-term efficiency to produce a warehouse design that meets your current needs, while planning for future growth.
• Defining operational needs.  An engineer can start by identifying your most basic requirements, such as ideal pallet sizes, and assist you in identifying issues with your current facility. They can then gain an understanding of how your product moves throughout your facility, and determine where specific items should be placed to deliver the highest level of productivity.
• Selecting the right racking. Every operation has unique requirements, and making the wrong racking decisions can hinder efficiency. An engineer can help you choose the right rack height and layout to optimize your warehouse flow and safety – while maximizing storage capacity. 
• Choosing MHE. Choosing material handling equipment may seem like a simple task; however, it is just the opposite. An engineer will understand the importance of this and will guide you in selecting the proper number and type of equipment, as well as the correct attachments for your facility and products.

Not All Warehouse Management Systems Are Equal

The best third-party logistics (3PL) providers have standardized, repeatable processes that can deliver consistent reliability and efficiency. However, supply chain management is an ever-changing landscape. Only through advanced technology can you get the flexibility to efficiently meet new requirements.

This is why choosing a logistics partner with a tier 1 Warehouse Management System (WMS) is essential. Such systems bring a variety of advantages, such as:

• Flexibility. A tier 1 WMS is versatile enough to meet almost any request a customer has.
• Better labor management. On the surface, this doesn't seem like a customer advantage. However, when a 3PL has access to greater detail on operations, it can allocate staff time more efficiently. As a result, it is able to price its services more competitively. 
• Real-time visibility. This feature simplifies management. Tier 1 systems often have an online portal, where clients can view inventory levels/reports, and schedule receipts and shipments.
• Service reliability and accuracy. A tier 1 WMS enables a 3PL to more consistently and reliably deliver services customers need every day.
• Product safety. Advanced systems not only allow 3PLs to mitigate the occurrence of lost inventory, but they enhance traceability. This is especially important with food and/or serial number tracked products. 

Partnering with a 3PL that has a tier 1 WMS ensures the flexibility to manage your supply chain's constant evolution. It also brings access to features that aid safety and efficiency, while helping to reduce expenses. 

What is the Value of a HACCP Certified 3PL?

The Food Safety Modernization Act (FSMA) is changing how the supply chain functions. Moving forward, companies will need to be more aware of the safety and integrity of their products after they leave the production facility. Partnering with a 3PL company that is trained in Hazard Analysis & Critical Control Points (HACCP), and has a documented HACCP plan is the answer to FSMA standards.

HACCP is a systematic approach to the identification, evaluation, and control of food safety hazards. A plan must be crafted for each food-grade commodity the 3PL handles to ensure specific procedures are being followed. When choosing a 3PL, ask to see their HACCP plan for your commodity. Superior facilities will be able to produce this plan and walk you through their SOPs.

To acquire HACCP certification, facilities must complete a three-day course administered by companies such as ASI Food Safety Consultants. Sessions cover everything from why a HACCP plan is required, to building your own plan. Though retraining is not required, the best 3PLs will take this course every few years to ensure they remain best in class. 

Benefits of working with this type of 3PL include:

• Product safety. Companies gain peace of mind knowing their product's integrity is being protected while outside of their control. Product safety throughout the supply chain is critical. 

• Cost savings. HACCP certified 3PLs have such robust inspection processes that damage or pest issues are identified quickly at the time of receipt. This enables companies to quickly track the issue back to the carrier or porduction facility, making it easier to recoup incurred expenses while preventing future damaged product. 

• Avoid cross-contamination. HACCP certified 3PLs have thorough inspection processes, which help staff identify and deny entry of any contaminated (pest or other contamination) product. This eliminates the risk of cross-contamination with already stored food grade products. 

How Will FSMA Impact Carriers and Food Transportation?

While the Food Safety Modernization Act (FSMA) continues to be a work in progress, one thing is for certain – it will generate greater accountability. That accountability will extend through the supply chain to include carriers transporting food products for humans and animals.

The Food and Drug Administration’s (FDA) goal is to develop standards to ensure the safety and integrity of food products. Building off the Sanitary Food Transportation Act, FSMA will test carriers’ documentation skills. In addition, the new rules will bring equal accountability to shippers, carriers, and receivers of food products.

Setting standard operating procedures for tasks such as cleaning trailers, locking and sealing loads, and properly refrigerating products isn't particularly challenging. However, developing a process of collecting, organizing, and storing this information for easy retrieval at a later date is where carriers may face an obstacle.

New standards will make technology almost a prerequisite for carriers.

For instance, document management systems likely will be the norm for linking inspection paperwork to bills of lading. Likewise, the industry could see GPS systems in trucks become standard for carriers, as regulations demand tighter tracking and traceability of food products while they are on the road.

As FSMA approaches, it’s important that food manufacturers review the standard operating procedures of their logistics providers. Questions to ask are:

• Do they have established criteria for inspecting trailers before loading?
• How are these records maintained?
• How quickly can they be produced for review?
• Do they have standards for inspecting products upon arrival?
• How do they ensure trailers maintain the proper temperature for products?
• Do they have real time/GPS tracking and tracing capabilities with their equipment? 

How Managed Logistics Can Improve Performance

Imagine if, when building a house, owners went out in search of each specialist alone – finding an electrician, plumber, painter, etc. The sheer time and effort required to do this would be astronomical and easily double the time necessary to complete a project. A general contractor makes much more sense.

Yet many companies choose to design and manage their logistics “house” internally. They pick this carrier for a specific line, another carrier for that line, and task an internal resource or department to manage it all.  Like the building example above, it accomplishes the same job, but not efficiently.

This is the thought behind why companies turn to managed logistics. One major advantage is a much more complete approach. Instead of parceling out tasks, businesses gain an expert who can simplify logistics by providing a total solution.

Other advantages include:

• One point of contact. Instead of managing multiple carriers, sources, and schedules, one company now takes care of all of logistics, and the substantial paperwork that comes with it.

• Improved efficiency. Often a logistics network develops organically through the years. As a result, nobody takes a wider view of the system as a whole. By outsourcing the function, an expert can provide an independent view.  Using their experience and network analysis tools, a logistics provider will develop an overall strategy, identifying efficiencies to yield the best performance. 

• Better allocation of resources. Companies no longer are tasked with recruiting and managing logistics staff. Time can be focused on managing talent in more key areas of the business. 

• Savings. Volume discounts a logistics provider can leverage from carriers, combined with better overall efficiency, should net a cost savings for companies.