Logistics Management - June 2010

warehouse & Dc
Distribution Network Redesign
consolidating large, bulky, difficult to
handle product lines—such as furniture—into
one facility. “Most of the
day-to-day items still ship out of their
traditional network, but now they’ve
got a large-goods focused facility,” says
Brockmann. “It lowered the inbound
cost, decreased handling cost, and kept
specialized material handling and transportation
in one place, while freeing up
much-needed storage capacity in the
other DCs.”
Tip # 3: Being green can
bring more green
The whole movement towards environmentally-friendly
or green networks has
certainly helped companies enhance
their level of social responsibility—but
it’s also saving
them money.
One of the best ways to
get started, says TranSystems’ West, is
by reducing your carbon footprint and
cutting back on transportation costs by
winnowing down the miles driven or
the number of trucks and shipments.
More transportation managers are also
looking into intermodal opportunities
versus truckload. “It’s not only to
reduce costs, but also to be more greenfriendly,
because rail is more energy
efficient with less emissions,” he adds.
West predicts even more emphasis
will be put on “going green” as future
regulations on emissions will likely
increase and a potential cap and trade
market will evolve. “We anticipate a
substantial growth in carbon footprint
analysis as companies will not only conduct
studies to identify their carbon
footprint, but also make supply chain
network design decisions regarding the
number of their facilities, size of their
transportation fleets, and their potential
carbon penalties, tax credits, or
trade value,” he adds.
In any network study, it’s essential
to not only reduce costs as products
flow from one facility to the next,
but it also makes sound economic
and environmental sense to reduce
operating costs within each facility
in the supply chain. For example, at
each DC, use fans for air circulation;
replace high-intensity discharge lights
with energy-efficient fluorescent lighting;
and consider installing solar panels
on rooftops. These are just some
of the more popular environmentally
sustainable initiatives that are not only
part of good corporate citizenship, but
also reduces operating costs of DCs
across the network.
Tip #4: Get creative
with transportation
The biggest cost drain on distribution
networks has typically been transportation
costs; thus, finding creative lowcost
ways to reduce these
costs can certainly go a long
way. Much of it involves collaborating
and negotiating
with trading partners and other carriers
to create more efficient loads, eliminating
“empty miles,” and achieving lower
transportation costs overall.
West suggests taking advantage of
online freight exchanges to look for
backhaul opportunities. Consolidate
not only on the outbound but also in
the opposite direction.
How does it work Shippers typically
sign up for online freight exchanges
and post key lanes that they plan to
share with other companies in order
to reduce costs. Load-matching services
have been offered for many years,
but have only recently been tapped for
long-term, continuous arrangements
between what can be two completely
unrelated companies. We showed a
terrific example of this in LM’s March
feature “Macy’s maneuver to fill empty
miles.” For a subscription fee of less
than $2,000 a year, Macy’s is seeing an
average annual savings of $25,000.
In another transportation costsaving
maneuver, Metersky describes
how large retail companies are now
taking more control over inbound
freight. “Loads once transported by
truckers hired by suppliers are now
being transported by the retailer’s own
dedicated carriers and private fleets,”
he explains. Retailers save money
because they can now dictate what
carrier and mode can be used for their
inbound merchandise and have better
control of inbound shipments.
Tip #5: It’s time to consider
inland ports for your network
For a few years now, congestion issues
along with sustainability and clean air
mandates in West Coast seaports have
companies looking into inland
ports in cities such as Kansas
City, Chicago, Memphis, Dallas,
Columbus, and Atlanta.
The Center for Transportation
Research at the University of Texas
A few more network redesign nuggets from our panel
“Studying your distribution
network should absolutely be
part of you continuous improvement
initiatives. You
should always be looking at
how your network is performing
against how you plan. It shouldn’t be
these big studies that happen every three to
five years.”
— Jeff Metersky, vice president of the
supply chain strategy practice at
Chainalytics
“Look for opportunities to
reduce miles driven in your
network. This will only to save
costs but also reduce emissions
that would benefit sustainability
programs within
your organization. Establish a baseline
to determine what your carbon footprint
looks like and then look for ways to improve
on that.”
—Troy West, assistant vice president at
TranSystems
“Don’t assume that your postrecession
business is going
to mirror your pre-recession
business. Everybody’s been
affected by the recession and
has re-evaluated how they do
business. Your customers and what they
want are going to change. ”
— C. Thompson Brockmann,
principal at Tompkins & Associates
44 Logistics Management WWW.LOGISTICSMGMT.COM | June 2010