When proposed with the option of stand alone warehousing versus an integrated operation of warehousing and distribution, many managers today shrug at the notion of added responsibilities. So, they continue on with their typical approach, and the end result is profit reduction and dissatisfied customers.
While this is not an across the board occurence, it is commonplace enough to bear consideration of a new way to view housing and distributing inventory. The profit reductions can occur as a result of one segment, i.e. the warehouse or distribution, focusing their attention on what only they can control at the expense of other functions of the supply chain. This creates an avalanche of cost increases ultimately impacting the end customer, thus lost revenue.
7 Reasons Why Integration is the Best Bet for Warehousing and Distribution
1. Improved Efficiency
There is a difference between efficiency in logistics and warehousing. Logistics efficiency revolves around timely deliveries, delivering quality, ensuring deadlines are met, and keeping costs inline. Warehousing efficiency is focused on optimizing available space, lean organization, accurate and quick picking, and proper training of staff. The following benefit of integration ties directly into the improvements in efficiency, as each will be under one “roof”.
2. All in One
It would be foolish to assume that every business that does not have integrated warehouse and distribution is losing revenue and customers. However, a simple analogy is all one has to consider to see the inherent difficulties with 3rd party inclusion. The more hands in the mix, the more opportunities for trouble. When, since it is not a matter of if, trouble occurs the ease at which these challenges can be faced head on become simpler. Rather than navigating the numerous departments of differing companies, everything can be tackled in house.
3. Quicker Response Times
With less hands in the mix, response times to questions and issues will be handled in a time efficient manner. Proper leadership will ensure that management and staff are held accountable for their response times. A simple analogy to consider is this - Is it slower to travel a certain distance on a highway that has 5 tolls or 2?
4. Less Administration Costs
Do you currently have specific suppliers for your warehouse operations and your logistics? Would it not be simpler to consolidate suppliers for both warehousing and distribution? With integration in place, this becomes a reality and lowers administrative overhead.
5. Tailored Service
With an integrated distribution in place, it is not far-fetched to expect more control over how and when deliveries occur. Is there a particular weakness in the supply chain? With both of these operations under the same “roof”, the ease at which decisions can be made to better provide products and services improves.
6. Overall Lower Costs
With the implementation of an integrated system, lower costs will be seen across the board. This comes as a result of improved efficiency between warehousing and distribution. Seamless communication platforms can be put in place that enable each department to communicate effectively. As the end customers see the improvements, revenues increase.
7. Improved Manufacturing Efficiency
In a stand alone environment, for example with warehousing, if the focus is on keeping inventory levels lean then this can actually increase manufacturing and distribution costs. This is possible because the stand alone warehouse is in a position of neutrality in relation to the other aspects of the supply chain. The integrated system keeps both warehousing and logistics under the same goal of lowering overall product costs.
There is some confusion in the difference between a stand alone and integrated system. A stand alone warehouse, for example, does everything it can to lower its costs and improve its profit margin without regard to the overall costs in the supply chain to the organization.
The integrated system focuses on the overall costs in the supply chain, in essence from start to finish. The flawed stand alone mindset enables costly decisions to be made that may greatly improve one link in the chain, yet those cost savings are then cast aside as another link in the chain has to overcompensate. The intentions of the stand alone are good, to decrease their costs and improve profitability. Yet they come at the expense of others in the supply chain, although many times inadvertently.
While these 7 reasons are not fully inclusive of all the benefits to an integrated warehousing and logistics operation, they do shed light on the pragmatic business models that have already been executed with great success.
In the efforts that each company puts forth to improve overall efficiency and effectiveness, it serves well to make mention of the practical benefits that come with mobile workstations. Reductions in wasted time from pickers criss crossing the warehouse floor, improved accuracy, improvements in costs, and overall increases in efficiency can be expected. These make for perfect complements to the integrated warehouse and distribution operations.
