Cliff's Notes
The Expanded Role of Warehousing
Warehouses aren’t just for storage anymore. Many companies are expanding their definition of warehousing in order to streamline their supply chains and better manage costs.
Warehousing Evolves
For many manufacturers, the warehouse has become a location for any business activity that isn’t officially supported in the manufacturing environment.
At Saddle Creek, we have noticed a gradual expansion of the services our customers expect as part of their warehousing operations. We are being called on to provide product customization, display packaging, order assembly, process returns, cross-docking and more.
What is driving this evolution? At first, it was motivated primarily by the desire to take links out of the supply chain – to streamline the manufacturing process. But today, many manufacturers are taking it one step further. They’re saying, “Let’s circle back to the beginning of the process and make sure that costs are optimized and as close to the customer as possible.” They’re taking everything that doesn’t lend itself to a high-speed, highly mechanized, low-labor environment and sending it to the warehouse.
At Saddle Creek, we’re seeing an increased demand for several services:
Secondary packaging and product customization
By bringing more functions closer to the customer, manufacturers can delay product configuration until the last possible minute to meet current demand while controlling the cost of carrying and managing inventory. That may mean assembling a back-to-school P.O.P. promotion, adding a colored face plate to a cell phone, shrink wrapping a rainbow pack of sports drinks, or making a last-minute wheel change on a piece of construction equipment.
Cross-docking
Companies find that cross-docking gives them an important opportunity to take costs out of their supply chains and accelerate the velocity of inventory, so they can get their products to market more quickly and economically. According to a cross-docking trends report we sponsored last year, 52 percent of respondents currently cross-dock and another 13 percent do not cross-dock now but plan to cross-dock in the next 18 to 24 months. This is a perfect example of using a warehouse for more than just holding inventory.
Shared-space environment
Another example would be the increased interest in shared space, or multi-client warehousing. Companies are looking for ways to get closer to their customers without increasing their overhead. The shared space environment balances the needs of multiple customers so that they can meet peak requirements every year without having to invest in permanent space and equipment.
For example, we recently built a new warehouse that could accommodate the current distribution needs of two of our customers and still handle growth and seasonal fluctuations. These two customers share space in a 487,000 square foot building on our Lakeland campus. Neither customer pays for any unused space, and both now have the flexibility to handle whatever the future might bring. Given the current economic times, this is as important as it has ever been.
Moving Forward
Many manufacturers are recognizing that 3PLs are often in a better position than their own internal operations to adapt to this expanded warehouse role. Convenient facilities with established skilled labor, reduced overhead and flexible solutions are just some of the ways that organizations like ours can help companies meet customer requirements and improve their bottom line while still allowing for future growth.
We anticipate that the demand for specialized services from warehouse providers will continue to rise every year as manufacturers focus on their core competencies. Saddle Creek is ready and eager to play a role in this growing trend.
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Cliff Otto is president of Saddle Creek Corporation and Saddle Creek Transportation. He has more than 30 years of industry experience and has held leadership roles with the Council of Supply Chain Management Professionals (CSCMP) and several grocery industry associations, and served as national president of the Warehousing Education and Research Council (WERC).