What is a Network Analysis?

Supply chains aren’t just created in one day and then operate unchanged forever. Like all elements of a business, they grow organically, over time. Through the years, customers change, and along with them come new distribution needs. Those alterations no doubt impact delivery requirements…and this is just on the outbound (feeding customer demand) side of the equation. Inbound transportation (feeding production) adds further management complexity.

Along with this organic growth come additional expenses. So how do you know if your supply chain is efficient? Could costs be reduced? Could performance be improved? These are the questions that plague in-house transportation departments. Answers are difficult to arrive at.

It’s been said that one cannot objectively examine a system they are a part of. That’s the reason many companies turn to a 3PL with expertise in transportation management to perform a network analysis. In this objective review, a 3PL company will look at:

• Customer requirements. How do you balance inventories against customer service needs and distribution costs?
• Shipping locations. Where should distribution centers (DC) be located? How many DCs should the company have? Which customers should be served by each DC?
• Storage needs. Are there gains from plant-direct shipping? Should the company contract for warehousing services or operate its own DCs?
• Volume. Which product lines should be produced at each plant and how much? Which suppliers should be used?
• Transportation Modes. Can intermodal or rail be used to reduce costs? Does a pool distribution model make sense? What combination of LTL and TL is most efficient while still meeting transit and volume requirements?
• Data and processes. Are you utilizing industry best practice? Do you have the right talent systems, and processes for performance? Do you have models? Should you be refreshing models with new data?

The goal of a network analysis is to eliminate unneeded movement, which will deliver long-term cost savings. This is done through reducing touches and paid transportation mileage. Uncovering these opportunities requires a 3PL that possesses not only many years of experience, but also the tools to compile and evaluate data.

However, by choosing an experienced 3PL to provide this service, companies can see significant benefits. Logistics savings often range from 8 to 12 percent.

To learn more about this topic and supply chain management, read a column written by WOW Logistics President and CEO Howard Kamerer for the April 18 issue of Cheese Market News. The column can be found here.

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.

No Substitute For Experience When Building A Warehouse

Building a warehouse seems like a pretty basic undertaking, right? At its core, a warehouse is four walls, a roof, and some dock doors. However, there are a variety of “little” things that can have a huge impact on how the facility operates.

That’s why choosing a designer/builder experienced in warehousing is so important when embarking on a new project. A builder with knowledge gained only by completing millions of square feet of work, will be best qualified to make recommendations on where to get the maximum benefit for dollars spent. There is no substitute for this experience.

A skilled builder of warehouses will discuss a variety of elements that can keep operating costs down, such as:

• Selection and placement of racking. This is the single biggest component governing the efficiency of a warehouse or distribution center. A company will never overcome an inefficient in-the-box design, which underlines the importance of selecting a builder/designer who can provide this valuable engineering support. Few builders can.
• Motion-sensor lighting. Reduces energy consumption by lighting only the spaces that are in use.
• HVLS fans. High Volume Low Speed (HVLS) fans move a great deal of air over a wide area, which helps reduce heating and cooling costs.
• Steel reinforced trailer pads. Constant dropping of trailers in the same spot tends to break up concrete over time. Steel reinforced pads help prevent such costly repairs.
• Super flat floors. This specialized concrete work is a prerequisite for taller racking. The benefit comes in being able to utilize the full cube space of the structure. 

There’s nothing basic about building a warehouse or distribution center. Since the efficiency of the facility is determined long before product arrives, it’s important to select a builder/designer who is highly experienced in such projects. They will be able to present further ideas to streamline operations, reduce overtime costs, and trim utility expenses.

What Is Contract Operations And What Value Does It Bring?

Business is all about focusing on your core competencies to deliver value to customers. Savvy owners know this, and can quickly determine what functions to keep in-house and which ones to outsource to an expert. This is why companies choose contract operations.

Contract operations basically means turning over warehouse or distribution center operations to a third party — someone skilled in such activities. This distribution expert will take on recruitment and management of staff; purchase of MHE and racking; implementing warehouse management systems; and is responsible for all storage, handling, and shipping. Contract operations could be provided at a company’s own facility or delivered at an off-site warehouse.

Advantages of such an arrangement include:

• A lower, more predictable cost structure. Capital expenditures (MHE, racking, etc.) are built into a fixed rate schedule that simplifies budgeting.
• Improved warehouse performance. An expert approach, well-defined and implemented SOPs, and advanced technology in warehouse management systems combine to yield better efficiency and greater productivity.
• Location assistance. Often, providers can assist in identifying the optimum location for a warehouse to help reduce transportation costs. Such a service is valuable as transportation is the biggest supply chain expense, at five times the cost of storage.
• Better allocation of resources. By not having to manage warehouse operations, companies are able to focus on their core competencies that deliver value to customers.

For many companies, contract operations is a good fit. However, they must select a service provider who understands their unique needs. This is particularly important if the stored items are food products, which require specialized knowledge and SOPs.

When Bad Weather Hits, Quality Carriers Shine

Sub-zero temperatures are not kind to diesel fuel; they push it toward an unstable gel, which impedes its flow. Not coincidentally, the freezing temperatures and the widespread nasty winter weather impacting most of the country can similarly impede the flow of cargo over the nation’s highways.

Generally speaking, loads are moving a little slower, and missed appointments may have become more frequent this winter.

These conditions can offer a glimpse into the quality of your carrier. When bad weather hits, delays are almost a certainty, but how they are dealt with separates high quality providers from the pack. The service aspect of the relationship becomes critical. Here’s what comes with quality:

• Proactive planning. Quality carriers will plan as much as possible for the impact of bad weather. They will anticipate customers’ scheduled shipments and collaborate to move them up or back to ensure the best result. They understand their customers’ unique needs – whether it’s making certain raw materials arrive to keep production rolling or ensuring on-time delivery to a key partner.

• Communication…lots of it. The best in the business will have an established line of communication (emails, website notices, hotline, etc.) for customers to receive updates on any developments, such as weather delays or equipment breakdowns.

• The pivot. Sometimes even the best hatched plans require a course correction. Carriers with quality systems in place and skilled staff will have the experience and flexibility to deftly pivot in adapting to changing situations.

The quality of your carrier should shine in the worst of conditions. How has yours measured up this winter?

Warehousing Insurance: Keeping Everyone Covered

The insurance coverages carried by a warehouse operator is one of the most commonly misunderstood elements of the relationship between the warehouse operator and the customer.

In addition to the normal business liability insurance coverages that most companies carry (e.g., commercial general liability (CGL), workers compensation, and motor vehicle), reputable warehouse operators also carry warehouse legal liability coverage. Warehouse legal liability coverage is a unique type of liability insurance policy that responds when a warehouse operator’s failure to exercise reasonable care in the handling and storage of a customer’s goods results in loss of, or damage to, those goods.

Warehouse legal liability insurance is third-party coverage

That means that if the warehouse operator is negligent in the care of the customer’s goods, the insurance carrier directly pays the customer for the loss incurred. For that reason, a customer cannot be, and does not want to be, named as an additional insured under the warehouse operator’s warehouse legal liability policy.

As a warehouse operator’s warehouse legal liability policy only pays a customer if the warehouse operator has been negligent in caring for a customer’s goods, the customer is still responsible for insuring its goods against other types of losses (e.g., fire, windstorm, etc.).

It is also important to note that virtually every warehouse legal liability policy excludes liability for loss or damage in instances where the warehouse operator has agreed to take on a higher degree of responsibility for the customer’s goods beyond what is legally required (i.e., “reasonable care”). This exclusion is necessary because warehouse legal liability policies are underwritten by insurance carriers on the basis of insuring the risks associated with the warehouse operator’s negligence. If a warehouse operator has agreed to assume greater liability for a customer’s goods, then the risks are obviously much more extensive than what the insurance carrier took into account when setting its premium.

In the event of significant loss or damage to the customer’s goods attributable to the warehouse operator’s failure to take reasonable care of the customer’s goods, both the warehouse operator and the customer depend on the warehouse operator’s warehouse legal liability policy to respond to the claim. As such, if a warehousing services agreement contains any provision that requires the warehouse operator to assume liability for a customer’s goods beyond the standard of “reasonable care”, then such a provision may void the warehouse operator’s warehouse legal liability coverage thereby putting both parties in an unfavorable position.