Christmas is here for CPG companies.Although we like to talk about JIT and Demand Driven (a relative term, anyway), the fact of the matter is that for apparel, toy and so many other products, Christmas is here (This article has lots of YouTube links and an old Christmas carol to get you in mood).
I once did a project for a major toy company, and not only was our plant cramming the warehouse, working in full production three shifts and weekends, but the products coming in from Asia made a hot August a hotter month — from no air conditioning in the warehouse, to every day shipments arriving. As the temperate rose to 97 degrees outside and over 100 degrees inside, the warehouse filled up to capacity also rose to 100%, leaving us with few choices. Stop the shipments and incur risk and higher transportation costs later on, or seek alternative warehouse space. We knew it was coming — all those babes in Toyland and their parents who were poised for the Christmas season — so why did we not plan?
The toys were not going to march on their own to the customers, so we needed a solution — now. But as the saying goes, don’t let a good crisis go to waste. We also needed a longer-term solution — we had global sourcing and global customers.
Ideas Proposed/Ideas Accepted
- Negotiate overflow warehouse space. The old way was to pay whether used or not.Many warehouses sit empty much of the year. The new way is hedge contracts with warehouse companies.
- More nuanced approaches can include flexible warehouse approaches to support Multi-channel strategies:3PLs that are paid variable service rates, or seasonal fulfillment agreements for direct ship, which work especially well with web items or large items such as TVs and computers, or configurable items. The 3PL can provide configuration services. Read Flexible Warehouse article by Bill McBeath.
Rethink your warehouse design:
- Most warehouse managers are still not using space well. Rethinking the flow, the design etc. can all be done. Read article about better warehouse design.
- Of course technology solutions such as Warehouse Automation (YouTube), WMS, and locating systems to make the warehouse more flexible can be implemented, as well.
- Redesign is a critical exercise. But many distribution strategies do not consider the ‘right placement’ and levels of inventory which cost so much money — wrong inventory in the wrong staging locations. Re-address your Network optimization strategies.
- Designing optimization strategies today should consider not only the network under your view, but also how your carrier plans to move your goods.
- The Logistics network today is all the way across the chain. And variable transportation strategies can be applied across the whole virtual supply chain.
- Of course there are risks in global sourcing strategies, so outsourcing or relying on your supplier to assume a major role can have its risks. Plan wisely.
Taking the dive — WMS applications:
Warehouse management solutions come at all price points, and as of late, even SaaS solutions are becoming very popular. We will be updating our warehouse report to include these solutions for you very soon. (If you are a WMS solutions provider and have not received an invitation to be included in our WMS research report, please contact us right away to get included).
Avoiding the holiday crunch can be done by better clarity of demand (as in this Mickey Mouse cartoon) but for most consumer goods companies, it is the warehouse that is the key strategy.
Managing it well can save you money and increase sales significantly.
To view other articles from this issue of the brief, click here.