The distribution center (DC) is a key component of the supply chain, providing organization and storage as a product moves from manufacturer to consumers. E-commerce fulfillment is a growing part of the supply chain and one of the major influences on distribution centers. With an increased demand from consumers, optimizing DCs is more important than ever. Distribution centers with traditional material handling equipment and software may struggle to keep up. In 2015, the average number of SKUs increased by 18 percent and this year, 38 percent of companies plan to handle even more SKUs1.
Signs to evaluate your DC include business growth, inefficiencies in picking locations, increased labor costs with stagnant throughput levels, and constant utilization of more than 85 percent of reserve storage capacity2. As your business evolves, it is a key time to evaluate your distribution centers and partner with an experienced 3PL to adjust for trends such as e-commerce and keep the supply chain moving smoothly.
Finding the Efficiencies
Running your distribution center efficiently can enhance the company bottom line and keep shelves stocked for consumers. Partner with a 3PL that utilizes supply chain efficiency strategies to find the best solution that benefit your company3.
Location is key for a distribution center. Locating a DC closer to major markets, ports, and intermodal terminals can reduce inbound and outbound miles from DCs and eventually to consumers. Many companies are utilizing more frequent distribution centers to facilitate easy geographical proximity to final locations.
More DCs can lead to inventory challenges but coordinating an inventory optimization study can help to avoid the excess inventory supply that may result in more locations4. Additionally, logistics hubs with many companies within a small area can make recruiting and maintaining talent an issue. Partner with a 3PL with strong labor recruiting in logistics hubs to avoid losing talent to increased competition3.
Technology can play a large role in optimizing the supply chain. Utilize technology such as warehouse management systems, to gain visibility and avoid disruptions, reduce the need for excess inventory, and limit substandard performance. Additionally, investing in simulation to see how a solution plays out in the real world will ensure a more predictable outcome3.
Do you have the space?
Optimizing space in a distribution center can reduce cost, aid in inventory management, and increase efficiency. Facility design can make a significant difference. Utilizing overhead mounted conveyors or a lifted mezzanine for pick and packing and value added service can clear ground space and allow for more room for inventory. Additionally, utilizing narrow-aisle storage can free up space along with multi-level picking modules5. Automate storage and retrieval systems or vertical lifts can also allow for storage in less accessible areas.
Remodeling a current DC can also make for a cost-saving solution. Consider working with a 3PL with real estate capabilities to find the ideal location or facilitate construction on a current location, such as raising the roof of a building with low clearance height5.
As a core component of the supply chain, distribution center optimization is important to keep up with growing business and ever-changing markets. An end-to-end supply chain solutions provider can partner to not only design and build a DC, but can also provide strategic operational guidance for existing locations while supporting your business as it grows.