Maybe DC managers should take some cues from baseball. As baseball fans are well aware, some of the most successful pro teams have made big changes in the way they evaluate players in the past few years. Gone are some of the old standbys like batting average, runs batted in or earned run average. In their place are newer stats like onbase percentage and slugging percentage that better predict how much a player will contribute to the desired outcome—a win.
There could be a lesson in that for the DC world. Asked what measures they use to evaluate their operations' performance, managers in DCs across the country reel off their own old standbys—inventory count accuracy, cost per unit shipped or processed, or on-time delivery. Problem is, the measures they're using are oftentimes not aligned with their overall business strategies. Their metrics may tell them many things, but not what's really important: how far they've come toward achieving their corporate goals and how far they have to go.
To find out more about how metrics are used in today's supply chain operations, DC VELOCITY and a research team from Georgia Southern University and the University of Tennessee launched a two-part study earlier this year. By the time the survey cutoff date rolled around, more than 700 of DC VELOCITY's readers had responded to a pair of online questionnaires. (Download the full report of the findings.) When the tabulations were complete, it was clear that plenty of DCs are measuring their operations' performance. What wasn't so clear was whether they're doing it right.
No standards
When it comes to the metrics companies are using today, are there "baseline" metrics that everybody applies? Most emphatically not. There's no single set of metrics in widespread use; in fact, there's no single universally accepted logistics measure—no supply chain equivalent of baseball's slugging percentage or on-base percentage. Indeed, there's nothing even close. Asked to indicate which metrics they used (from a list of 80), the respondents' answers ranged all over the map.When all the results were tallied, not a single metric—even basic measures like on-time deliveries or cost per unit shipped—scored in the 90-percent range.
Though they could not identify a single universally accepted measure, researchers were able to identify basic groups of metrics that seem to be in fairly widespread use. Regardless of industry or type of business, most respondents used metrics from at least one of the following three broad categories: time-based measures, financial measures and service quality measures.
Within each of those categories, however, usage scores for the individual metrics varied widely. Among the time-based measures, for example, on-time delivery topped the list, mentioned by more than two-thirds (68 percent) of the respondents. Next on the list was orders shipped on time (63 percent), followed by finishedgoods inventory turns (57 percent) and number of overtime hours logged (55 percent). At the bottom of the list was dwell time (12 percent). It seems safe to say that nobody cares much about dwell time as long as an order departs and arrives on time.
As for financial metrics, cost per unit shipped or processed topped the list (63 percent), followed by total cost per order shipped (55 percent). Moving further down the list, fewer than half the respondents said they measured transportation as a percentage of revenue (47 percent), return on investment (43 percent) and cost per order (42 percent).
To measure service quality, companies typically resort to traditional inventory-based measures. The most commonly used metric was inventory count accuracy (71 percent), followed by overall customer satisfaction (54 percent). Other service metrics in relatively widespread use focused on order fulfillment; these included order picking accuracy (51 percent), picking errors (50 percent) and order fill rate (49 percent).
What measure to take?
Given that there are no clear industry standards where metrics are concerned, how do companies decide what to measure? Logic would dictate that they're choosing measures that best indicate how they're performing against the company's strategic goals. But surprisingly, that's not the case.
Respondents to the first part of the study were asked to identify not only the metrics they used but also their companies' overall strategy (in broad terms). Though you might assume that the companies whose focus was on, say, cost containment would focus on financial metrics, that wasn't the case. The researchers were unable to establish any real correlation between the metrics companies said they used and their corporate objectives (broadly categorized for survey purposes as cutting costs, maximizing asset utilization, increasing customer satisfaction or maximizing profitability).
Researchers did find a stronger link between the metrics used and a company's "location" within the supply chain—that is, whether its primary customers were end consumers, manufacturers, distributors/wholesalers, or retailers. That's not to say that all companies serving, say, retailers used the same set of clearly defined measures. Yet researchers were able to identify some statistically significant differences from group to group. (See Exhibit 1.)
Take units processed per labor hour, for example. Companies whose primary customers are retailers rarely track these numbers. But those that provide service to manufacturers and distributors/wholesalers live and die by this measure. Perhaps manufacturers are accustomed to thinking in terms of labor costs and timemotion studies. Or perhaps these are critical measures given the labor intensity and repetitive nature of their industries. Whatever the reason, most of them can quote this number down to the fraction of a unit.
Beyond measure
Given the apparently scattershot approach to metrics in the nation's DCs, it appears there's an opening here for companies seeking a competitive edge. It seems safe to say that a company that adopts metrics aimed at satisfying customers and supporting corporate strategy —not to mention increasing operational efficiency or cutting costs—could reap rich marketplace rewards.
But it won't just happen automatically. Becoming a "power user" where metrics are concerned means getting familiar with the corporate strategy. It means adopting and using metrics that align with that objective. And above all, it means finding out what customers regard as key metrics. (Many times, customers will provide scorecards to identify what they see as critical measures.)
All that requires time and effort, to be sure. But it could put you on track for a winning season.
Exhibit 1
Who's using what metrics?
Respondent's Primary Customer
Commonly Used Metrics
Less Commonly Used Metrics
Manufacturers
Customer satisfaction
Cost to serve
Units processed per labor hour
Source: Georgia Southern University, University of Tennessee and DC Velocity
Editor's note: This study represents the first step in what's expected to become a continuing investigation. Possible topics for future studies include developing a more in-depth understanding of benchmarking levels, defining specific metrics and perhaps developing recommendations for the best metrics for different types of companies to use.
E-commerce activity remains robust, but a growing number of consumers are reintegrating physical stores into their shopping journeys in 2024, emphasizing the need for retailers to focus on omnichannel business strategies. That’s according to an e-commerce study from Ryder System, Inc., released this week.
Ryder surveyed more than 1,300 consumers for its 2024 E-Commerce Consumer Study and found that 61% of consumers shop in-store “because they enjoy the experience,” a 21% increase compared to results from Ryder’s 2023 survey on the same subject. The current survey also found that 35% shop in-store because they don’t want to wait for online orders in the mail (up 4% from last year), and 15% say they shop in-store to avoid package theft (up 8% from last year).
“Retail and e-commerce continue to evolve,” Jeff Wolpov, Ryder’s senior vice president of e-commerce, said in a statement announcing the survey’s findings. “The emergence of e-commerce and growth of omnichannel fulfillment, particularly over the past four years, has altered consumer expectations and behavior dramatically and will continue to do so as time and technology allow.
“This latest study demonstrates that, while consumers maintain a robust
appetite for e-commerce, they are simultaneously embracing in-person shopping, presenting an impetus for merchants to refine their omnichannel strategies.”
Other findings include:
• Apparel and cosmetics shoppers show growing attraction to buying in-store. When purchasing apparel and cosmetics, shoppers are more inclined to make purchases in a physical location than they were last year, according to Ryder. Forty-one percent of shoppers who buy cosmetics said they prefer to do so either in a brand’s physical retail location or a department/convenience store (+9%). As for apparel shoppers, 54% said they prefer to buy clothing in those same brick-and-mortar locations (+9%).
• More customers prefer returning online purchases in physical stores. Fifty-five percent of shoppers (+15%) now say they would rather return online purchases in-store–the first time since early 2020 the preference to Buy Online Return In-Store (BORIS) has outweighed returning via mail, according to the survey. Forty percent of shoppers said they often make additional purchases when picking up or returning online purchases in-store (+2%).
• Consumers are extremely reliant on mobile devices when shopping in-store. This year’s survey reveals that 77% of consumers search for items on their mobile devices while in a store, Ryder said. Sixty-nine percent said they compare prices with items in nearby stores, 58% check availability at other stores, 31% want to learn more about a product, and 17% want to see other items frequently purchased with a product they’re considering.
Ryder said the findings also underscore the importance of investing in technology solutions that allow companies to provide customers with flexible purchasing options.
“Omnichannel strength is not a fad; it is a strategic necessity for e-commerce and retail businesses to stay competitive and achieve sustainable success in 2024 and beyond,” Wolpov also said. “The findings from this year’s study underscore what we know our customers are experiencing, which is the positive impact of integrating supply chain technology solutions across their sales channels, enabling them to provide their customers with flexible, convenient options to personalize their experience and heighten customer satisfaction.”
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
As the hours tick down toward a “seemingly imminent” strike by East Coast and Gulf Coast dockworkers, experts are warning that the impacts of that move would mushroom well-beyond the actual strike locations, causing prevalent shipping delays, container ship congestion, port congestion on West coast ports, and stranded freight.
However, a strike now seems “nearly unavoidable,” as no bargaining sessions are scheduled prior to the September 30 contract expiration between the International Longshoremen’s Association (ILA) and the U.S. Maritime Alliance (USMX) in their negotiations over wages and automation, according to the transportation law firm Scopelitis, Garvin, Light, Hanson & Feary.
The facilities affected would include some 45,000 port workers at 36 locations, including high-volume U.S. ports from Boston, New York / New Jersey, and Norfolk, to Savannah and Charleston, and down to New Orleans and Houston. With such widespread geography, a strike would likely lead to congestion from diverted traffic, as well as knock-on effects include the potential risk of increased freight rates and costly charges such as demurrage, detention, per diem, and dwell time fees on containers that may be slowed due to the congestion, according to an analysis by another transportation and logistics sector law firm, Benesch.
The weight of those combined blows means that many companies are already planning ways to minimize damage and recover quickly from the event. According to Scopelitis’ advice, mitigation measures could include: preparing for congestion on West coast ports, taking advantage of intermodal ground transportation where possible, looking for alternatives including air transport when necessary for urgent delivery, delaying shipping from East and Gulf coast ports until after the strike, and budgeting for increased freight and container fees.
Additional advice on softening the blow of a potential coastwide strike came from John Donigian, senior director of supply chain strategy at Moody’s. In a statement, he named six supply chain strategies for companies to consider: expedite certain shipments, reallocate existing inventory strategically, lock in alternative capacity with trucking and rail providers , communicate transparently with stakeholders to set realistic expectations for delivery timelines, shift sourcing to regional suppliers if possible, and utilize drop shipping to maintain sales.
National nonprofit Wreaths Across America (WAA) kicked off its 2024 season this week with a call for volunteers. The group, which honors U.S. military veterans through a range of civic outreach programs, is seeking trucking companies and professional drivers to help deliver wreaths to cemeteries across the country for its annual wreath-laying ceremony, December 14.
“Wreaths Across America relies on the transportation industry to move the mission. The Honor Fleet, composed of dedicated carriers, professional drivers, and other transportation partners, guarantees the delivery of millions of sponsored veterans’ wreaths to their destination each year,” Courtney George, WAA’s director of trucking and industry relations, said in a statement Tuesday. “Transportation partners benefit from driver retention and recruitment, employee engagement, positive brand exposure, and the opportunity to give back to their community’s veterans and military families.”
WAA delivers wreaths to more than 4,500 locations nationwide, and as of this week had added more than 20 loads to be delivered this season. The wreaths are donated by sponsors from across the country, delivered by truckers, and laid at the graves of veterans by WAA volunteers.
Wreaths Across America
Transportation companies interested in joining the Honor Fleet can visit the WAA website to find an open lane or contact the WAA transportation team at trucking@wreathsacrossamerica.org for more information.
Krish Nathan is the Americas CEO for SDI Element Logic, a provider of turnkey automation solutions and sortation systems. Nathan joined SDI Industries in 2000 and honed his project management and engineering expertise in developing and delivering complex material handling solutions. In 2014, he was appointed CEO, and in 2022, he led the search for a strategic partner that could expand SDI’s capabilities. This culminated in the acquisition of SDI by Element Logic, with SDI becoming the Americas branch of the company.
A native of the U.K., Nathan received his bachelor’s degree in manufacturing engineering from Coventry University and has studied executive leadership at Cranfield University.
Q: How would you describe the current state of the supply chain industry?
A: We see the supply chain industry as very dynamic and exciting, both from a growth perspective and from an innovation perspective. The pandemic hangover is still impacting decisions to nearshore, and that has resulted in a spike in business for us in both the USA and Mexico. Adding new technology to our portfolio has been a significant contributor to our continued expansion.
Q: Distributors were making huge tech investments during the pandemic simply to keep up with soaring consumer demand. How have things changed since then?
A: The consumer demand for e-commerce certainly appears to have cooled since the pandemic high, but our clients continue to see steady growth. Growth, combined with low unemployment and high labor costs, continues to make automation a good investment for many companies.
Q: Robotics are still in high demand for material handling applications. What are some of the benefits of these systems?
A: As an organization, we are investing heavily in software that will allow Element Logic to offer solutions for robotic picking that are hardware-agnostic. We have had success deploying unit picking for order fulfillment solutions and unit placing of items onto tray-based sorters.
From a benefit point of view, we’ve seen the consistency of a given operation improve. For example, the placement accuracy of a product onto a tray is far higher from a robotic arm than from a person. In order fulfillment applications, two of the biggest benefits are reliability and hours of operation. The robots don't call in sick, and they are happy to work 22 hours a day!
Q: SDI Element Logic offers a wide range of automated solutions, including automated storage and sortation equipment. What criteria should distributors use to determine what type of system is right for them?
A: There are a significant number of factors to consider when thinking about automation. In my experience, automation pays for itself in three key ways: It saves space, it increases the efficiency of labor, and it improves accuracy. So evaluating which of these will be [most] beneficial and quantifying the associated savings will lead to a “right sized” investment in technology.
Another important factor to consider is product mix. With a small SKU (stock-keeping unit) base, often automation doesn’t make sense. And with a huge SKU base, there will be products that don’t lend themselves to automation.
With any significant investment, you need to partner with an organization that has deep experience with the technologies that are being considered and … in-depth knowledge of the process that is being automated.
Q: How can a goods-to-person system reduce the amount of labor needed to fill orders?
A: In most order picking operations, there is a considerable amount of walking between pick faces to find the SKUs associated with a given order or set of orders. Goods-to-person eliminates the walking and allows the operator to just pick. I have seen studies that [show] that 75% of the time [required] to assemble an order in a manual picking environment is walking or “non-picking” time. So eliminating walking will reduce the amount of labor needed.
The goods-to-person approach also fits perfectly with robotic picking, so even the actual picking aspect of order assembly can be automated in some instances. For these reasons, [automation offers] a significant opportunity to reduce the labor needed to fulfill a customer order.
Q: If you could pick one thing a company should do to improve its distribution center operations, what would it be?
A: Evaluate. Evaluate the opportunities for improving by considering automation. In my experience, the challenge most companies have is recognizing that automation is an alternative. The barrier to entry is far lower than most people think!