In this paper I will discuss warehouse operations and how
they improve customer service, or detract from customer service. Many companies try to manage warehouse
operations themselves. Today warehouse
operations are more than some shelves and a fork lift. Warehouses are a sophisticated operation
within the corporation. In order to
provide superior customer service the warehouse operations must also be planned
to provide superior customer service. Every
contact with the customer must be done with superior customer service in mind
which includes storage and delivery to the customer.
First I will discuss from the perspective of the
supplier. Maintaining a warehouse is expensive. The building is a major asset carried on the balance
sheet as a fixed asset. This asset does
not generate income. The building itself
is large, so is the maintenance of the building, heating cooling, insurance, staff,
security, and the expense items go on. A
warehouse management systems (WMS) is a significant investment along with
computers , scanners, bar code readers, RFID readers, the staff to operate the
systems require training, and not for stereotypical warehouse worker. Managing a warehouse is not the core competence
or the niche that the supplier knows. So
the supplier has to be the best at supplying the goods they are known for; but
also now must be best in class in warehouse operations to run an efficient warehouse
and supply superior customer service. More times than not, the warehouse is an afterthought
for the company.
Second, the customer can maintain inventory at their
location. This could follow 2 different scenarios. The customer buys the inventory and stores
the material in their warehouse. This is
a traditional model. Here there are the
same warehouse expense, control and management issues. In addition, there is the cash outlay to
purchase the inventory and the concern for risk shrinkage, obsolesce or market price
erosion. The other scenario is becoming
more common, but fraught with the same problems. The customer has the supplier put the inventory
at the customer on consignment. Here the
customer still has to dedicate space for the inventory, staff, insurance,
computer system etc. The supplier or the
customer may manage replenishment. There
is some inherent distrust in this process, and could raise issues with audit
compliance especially with SOX compliance.
What is the obligation of the customer to consume that material? If they are contractually obligated to
consume the material on their site, then a case could be made they must
recognize that liability at the time it arrives, which defeats the purpose of
the consigned inventory program.
So what is the solution?
Third Party Logistics providers! These are the experts on customer
logistics. This is their core competency
and they provide expert service to the
customer and to the supplier. These companies
invest in state of the art warehouse management systems, security, and locate
to service the customer, and provide superior customer service. There is a cost to this service, but there is
an offset. If the supplier no longer has
to maintain their warehouse operations, then assets, cash and working capital
can be freed. The supplier no longer
needs to maintain the sophisticated computer system needed to run a warehouse,
not keep the staff, or the physical environment to safely store inventory. The
warehouse is paid for on an activity based system, where they pay based on
number of shipments received, number of SKU’s stored and number shipped. Customers could also value, if they maintain consigned
inventory on their premises in the past.
By removing that inventory, they free up space, and staff for their core
activity.
Third Party Logistics providers manage all aspects of
inventory for both the supplier and the customer. They manage replenishment of their stocks and
the stock of the customer on a just in time basis. In this win/ win scenario, the supplier can
provide a more superior customer service product to the customer, enhancing
their position with the customer by further distancing themselves from their
competition. The customer wins because
they have access to the inventory and are more likely to receive their order in
full without errors, with minimized risk of loss or damage in transit.
Superior Customer Service by using professionals with
expertise, and investment to maintain Superior Customer Service
I welcome your comments.
