In my previous posts, I have not mentioned the size of the warehouses I write about, I have chosen general issues affecting all kinds of warehouses more or less. I have received some comments on this and of course, the conditions is very different depending on the size of business and size of the warehouse. Which country the warehouse is located in also plays a major role. I work in Sweden where we generally have high labor costs compared to many countries, it makes the requirements of efficiency is very high and there is much focus on productivity in Scandinavian logistic units. We also have high operating costs due to our cold climate (heating), it means that we also have a strong focus on volume optimization, which means that it often pays to invest in any kind of automation solution.
Regardless of where the warehouse is located geographically, I think we can agree that those companies and that have the greatest challenges ahead regarding warehouse logistics are small and medium size units. That is because they will have exactly the same challenges in multichannel and more liberal rules for placing orders (to be competitive) as the big players. However, they will not have the same opportunities to invest in systems (WMS) and Automation.
Some companies choose to outsource (3PL), they want to focus on core business and may think that they do not have ‘knowledge and capital to develop the warehouse logistics. There is no guarantee that it will be more cost effective, who ensures that the 3PL company has the right expertise and system support? It is common to provide reference customers, but who guarantees that they have the knowledge to assess whether it is a good solution for you? Personally, I am not entirely in favor of outsourcing the warehouse logistics. There is a great risk handing over such a business critical activity like logistics to someone else which also need to make money on your business. Logistics is an area that more and more companies are focusing on in order to be competitive and in my opinion it is extremely important to have control of an operation that is so business critical.
If you choose not to outsource, but instead run a small or medium-sized warehouse in-house, you should consider at least two things.
1. Abolish the departments. A person is employed in the warehouse not only one department. Implement job rotation, which means all the staff are fluent and “playable” in the entire warehouse. The conditions of a warehouse changes hour-by-hour, goods in, order picking and packing regardless of task the workload changes during the day. To have personnel stationed in only one department causing serious costs in terms of sub-optimization. If you have a floating staff, you can continuously allocate resources where it is most needed right now. This method of working however, places very high demands on leadership and communication. You need to have good leaders who can delegate and give directives in a good way. My experience is that staff who work in such a flexible environment are happier and have a greater stimulation because the job is not so monotonous. The risk of repetitive strain injuries also decreases because you are not working in a static environment.
2. Make sure to have a WMS that is appropriate for your logistics. Maybe you cannot afford to invest in the biggest and the best system, but make sure it is suitable for your logistics flow. If you do not have a system that is adaptable, it is impossible to optimize flows. To buy a small cheap WMS and then have to pay development costs for every little process that should change is unsustainable. The costs of adapting the system becomes too high, if you not believe me look what an application consultant costs per hour. It is important to make as comprehensive feasibility study as possible, and choose a system that is as ready as possible for your business. It is definitely worth spending a little extra money on an established system instead of saving when you choose vendor and then pay dearly in development costs.
Roberth Karlsson
The conclusions you get are right, but not for the assumptions you have made. They are valid for all kind of warehouses, no matter where they are located and by whom they are operated.
Productivity is the key to survive. Every manufacturing company will agree. If they do not do so, a competitor will come and take their business. If you ask a service company about the above, they will answer the same, for the same reasons too, be sure.
One of the reasons 3PL’s are in the market is because they are supposed to do logistics better than their customers. This is not always true. As in any sector, there are good and bad ones.
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