Logistics Cost and Service 2011 - Squarespace · 2018-06-21 · Logistics Cost and Service 2011...
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Logistics Cost and ServiceLogistics Cost and Service2011
ESTABLISH, INC.
Conrad RossPiotr Pregner
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1. The Establish/Davis Database Evolution
2. Logistics Cost and Service
3. What companies are doing to control/reduce costs
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2007
The Establish/Davis Database EvolutionOver Time
2003
2005
Revised format
Great recession begins
2007
2001
M d D t b f il bl li
1999Davis Insights added
New European Database
Extended options
1992 Made Database form available on line
Restructured Database for globalization of logistics1987
1985
Chemical Manufacturers of America Database
European Database expanded, 10 countries1985
First European Database, FrancePrivate benchmarking system for GE’s 72 divisions
1983
GMA - Grocery Manufacturers of America Database
First private Database for FIEI
1982
1974
Set up Database
PMA - Pharmaceutical Manufacturers of America DatabaseDTPA - Drug and Toilet Preparations Association Database
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pCompleted first Workbook
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The Establish/Davis Database
The Database was established in 1974 and contains over 35
years of data.
Describes cost levels, service performance, productivity,
and operating ratiosand operating ratios.
Used by hundreds of companies to measure themselves
against industry profiles.
By submitting a one page questionnaire (on-line or
hardcopy), companies have access to the Database and
receive confidential reports free of chargereceive confidential reports free of charge.
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The Establish/Davis Database contains many Industries/Groups
Consumer Electronics
High-Value Industrial Durable
Computers
High-Value Consumer Packaged Goods
Grocery
Produce and Fresh Foods
Peripherals
Telecommunications
Industrial Replacement Parts
Meat and Fish Products
Frozen Food
Beverages
Chemicals
Industrial Supplies
Consumer Replacement Parts
Consumer Household Products
Health and Beauty Aids
High-Value Pharmaceuticals
Small Appliances
Large Appliances
Publishers
Low-Value Pharmaceuticals
Industrial and Consumer Wholesalers/Distributors
Apparel RetailersTires
Consumer Packaged Goods
Building Supplies/Hardware Products
L V l C P k d G d
Apparel Retailers
Drug Chains
Mass Merchandisers
Low-Value Industrial Durable
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Low-Value Consumer Packaged Goods Low Value Industrial Durable
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The Establish/Davis Database
Participants confidential reports include:Cost comparison by industry and product value.
Other cost comparisons participants receive:Other cost comparisons participants receive:By volumeBy sales revenue
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( )(Format)
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The Establish/Davis Database
Annually, we summarize the data, track it over time and report the results.
10
Logistics Cost as a Percent of Sales
68 7.77%
024
1974 1979 1984 1989 1994 1999 2004 2009
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The Establish/Davis Database - Average CompanyLogistics Costs Change
Annual Functional Cost Change(Percent of Sales)
g g
( )
50
75
InventoryWarehousing
0
25
Transportation
50
-25
0
-75
-50
1979 1984 1989 1994 1999 2004 2009
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Establish/Davis Database - Average Company2011 - Key Findings2011 Key Findings
Logistics costs for the average company in the database are
7.77 percent of sales and $64.20 per hundredweight.
Logistics costs decreased (5 to 6 percent) from 2010 to 2011
although there was a modest increase in warehousing costs.
O ll l i ti t l t t lOverall logistics costs are close to a ten-year low.
Companies with higher product values continue to have lower
logistics costs.g
Smaller companies continue to have higher logistics costs.
Service performance levels have remained about the same for
several years.
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The Establish/Davis Database - Average Company2011 Logistics Costs2011 Logistics Costs
C tCost% of Sales $/CWT
Transportation 3.79% $30.23
Warehousing 1.76 14.62
Customer Service 0.30 3.50
Administration 0 19 1 65Administration 0.19 1.65
Inventory Carrying 1.73 14.20
Total Logistics Costs 7.77% $64.20
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Cost as a Percent of Sales (7.77%)
Customer Service/
23%4% 2% 22%
Administration
Warehousing
Order Entry Inventory Carrying
23%
49%Transportation
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Cost per Hundredweight (CWT – $64.20)
AdministrationCustomer Service/O d E t I t C i
23%
5% 3% 22%d st at o
Warehousing
Order Entry Inventory Carrying($14.20)($1.65)($3.50)
($14.62)
47%Transportation
($30.23)
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AdministrationCustomer Service/
Cost as a Percent of Sales
23%4% 2% 22%
Administration
WarehousingOrder Entry Inventory Carrying
Cost per Hundredweight
5% 3% 22%
49%
AdministrationCustomer Service/Order Entry Inventory Carrying
23%49%Transportation
Warehousing
47%
Transportation
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The Establish/Davis Database - Average Company2011 vs. 2010 Logistics Costs2011 vs. 2010 Logistics Costs
2011 C t 2010 C t2011 Cost 2010 Cost% of Sales $/CWT % of Sales $/CWT
Transportation 3.79% $30.23 4.08% $34.15
Warehousing 1.76 14.62 1.75 12.90
Customer Service 0.30 3.50 0.43 4.51
Administration 0 19 1 65 0 23 1 78Administration 0.19 1.65 0.23 1.78
Inventory Carrying 1.73 14.20 1.79 14.63
Total Logistics Costs 7.77% $64.20 8.28% $67.97
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The Establish/Davis Database - Average Company2011 vs. 2010 Logistics Costs Change
Transportation
% of Sales $/CWT
7 1% 11 5%
g g
Transportation
Warehousing
‐7.1%
+0.5%
‐11.5%
+13.3%
Order Entry/Customer Service ‐30.0% ‐22.4%
Administration
Inventory
‐17.4% ‐7.3%
‐3 3% ‐2 9%Inventory
Total
3.3% ‐2.9%
‐6.1% ‐5.5%
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The Establish/Davis Database - Average Company2011 Logistics Costs2011 Logistics Costs
Cost as% of Sales
Transportation 3.79%
Warehousing 1.76
Customer Service 0.30
Administration 0 19Administration 0.19
Inventory Carrying 1.73
Total Logistics Costs 7.77%
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Cost as a Percent of Sales Over Time
5
4
f S
ales
2
3
a Pe
rcen
t of
1Cos
t as
02001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Transportation Warehousing Customer Service Administration Inventory Carrying
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Cost as a Percent of SalesOver Time
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Transportation 4.36 3.34 2.63 3.28 3.36 4.43 4.40 4.68 4.12 4.08 3.79
Warehousing 1.80 2.02 1.60 1.93 1.65 1.52 1.99 1.90 1.73 1.75 1.76
Customer Service 0.55 0.43 0.40 0.47 0.48 0.69 1.01 0.62 0.54 0.43 0.30
Administration 0 36 0 41 0 28 0 38 0 25 0 24 0 39 0 28 0 26 0 23 0 19Administration 0.36 0.41 0.28 0.38 0.25 0.24 0.39 0.28 0.26 0.23 0.19
Inventory Carrying 2.07 1.72 2.60 2.30 1.76 1.92 1.95 1.80 1.83 1.79 1.73
Total Logistics Costs 9.17 7.65 7.52 8.37 7.51 8.79 9.74 9.28 8.48 8.28 7.77
Low High
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Cost as a Percent of SalesOver Time
10
8
of S
ales
4
6
a P
erce
nt o
2
Cos
t as
a
02001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Transportation Warehousing Customer Service Administration Inventory Carrying
20
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The Establish/Davis Database - Average Company2011 Logistics Costs2011 Logistics Costs
C tCost$/CWT
Transportation $30.23
Warehousing 14.62
Customer Service 3.50
Administration 1 65Administration 1.65
Inventory Carrying 14.20
Total Logistics Costs $64.20
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Cost per HundredweightOver Time
$50
$30
$40
wei
ght
$20
$30
er H
undr
edw
$10
Cos
t pe
$02001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Transportation Warehousing Customer Service Administration Inventory Carrying
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On-Highway Diesel Fuel Cost (Over Time)
$45
$50$4.50
$30
$35
$40
$45
$3.00
$3.50
$4.00
sel F
uel C
ost
Cost pe
$15
$20
$25
$30
$1.50
$2.00
$2.50
-Hig
hway
Die
ser H
undredweig
$0
$5
$10
$15
$0 00
$0.50
$1.00
On-
ght
$0$0.002001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
On-Highway Diesel Fuel Cost Cost of Transportation
Source: U.S. Energy Information Administration
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Cost per HundredweightOver Time
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Transportation $19.18 $26.52 $20.30 $22.90 $27.80 $27.15 $32.69 $44.51 $40.00 $34.15 $30.23
Warehousing $11.38 $18.06 $14.12 $16.78 $12.88 $13.90 $15.96 $15.53 $14.73 $12.90 $14.62g $ $ $ $ $ $ $ $ $ $ $
Customer Service $3.70 $4.58 $2.53 $5.36 $4.97 $5.14 $6.61 $6.50 $6.01 $4.51 $3.50
Administration $2.40 $2.79 $3.73 $4.04 $3.40 $3.08 $4.62 $1.94 $2.07 $1.78 $1.65Administration $2.40 $2.79 $3.73 $4.04 $3.40 $3.08 $4.62 $1.94 $2.07 $1.78 $1.65
Inventory Carrying $23.62 $22.25 $27.79 $26.67 $28.75 $23.69 $24.02 $18.87 $18.08 $14.63 $14.20
Total Logistics Costs $60.11 $67.71 $68.48 $75.54 $77.80 $72.96 $83.90 $87.35 $80.89 $67.97 $64.20Total Logistics Costs $60.11 $67.71 $68.48 $75.54 $77.80 $72.96 $83.90 $87.35 $80.89 $67.97 $64.20
Low High
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Cost per HundredweightOver Time
$100
$80
eigh
t
$40
$60
r H
undr
edw
e
$20Cos
t pe
$02001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Transportation Warehousing Customer Service Administration Inventory Carrying
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Company Size
Smaller companies continue to have higher logistics costs.
10
12 10.31
Sal
es
6
85.92
5.27 4.73
erce
nt o
f S
2
4
ost
as a
Pe
0<$200 $200 - $500 $500 - $1,250 >$1,250
Co
Annual Sales ($ MM)
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Annual Sales ($ MM)
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Product Value
Companies with higher product values continue to havelower logistics costs.
ales
10.00
12.00
9.059.46
rcen
t of
Sa
6.00
8.00
8.07
st a
s a
Per
2.00
4.00
6.00
3.25
Co
Product Value in $/Pound
0.00
2.00
<$1.50 $1.50 - $5 $5 - $15 >$15
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$
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Customer Service Levels
2011 Measurements
Total order cycle time - 7.0 days y y
Product Availability (Shipped Complete)Orders 93%Lines 95%Units 95%
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Average Performance Reported
FULL DATABASE
Total Cycle Time (Days) 7 8 7 8 8 8 9 9 8 7 7
01 02 03 04 05 06 07 08 09 10 11
FULL DATABASE
Product Availability(% Orders) 87 88 85 91 88 84 83 90 91 92 93
(% Lines) 92 95 91 94 92 89 93 92 94 95 95
(% Cases) 90 93 93 91 94 90 94 94 95 95 95
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What companies are doing to control/reduce costs and add capacity in this troubled economy?p y y
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LOGISTICS NETWORKS
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LOGISTICS NETWORKS
Reconfiguring networks as a result of shifts in the
manufacturing and customer base.
Reconfiguring networks to consolidate the operations of
i d/ d i ti acquired/merged organizations.
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TRANSPORTATION (49%)
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TRANSPORTATION (49%)
Centralizing purchasing.
Le eraging ol mes (plants/DCs inbo nd from Leveraging volumes (plants/DCs - inbound from
sources/suppliers, transfers and customer shipments).
Formalizing the carrier selection process.Formalizing the carrier selection process.
Re-evaluating ordering patterns to identify pool point/cross dock
opportunities.
Separating imbedded transportation costs from the landed cost
of materials inbound from sources, to:
— Identify, evaluate and control costs.
— Leverage additional volume.
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WAREHOUSING (23%)
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WAREHOUSING (23%)Reducing operating costs by adjusting space requirements to
reflect lower inventory levels.
Purchasing factory rebuilt/used equipmentPurchasing factory rebuilt/used equipment.
Centralizing purchasing.
Leveraging volumes:
— Supplies and equipment
— Third party providers (3PL)
Formalizing the provider agreement process.
Shifting to 3PLs/shifting away from 3PLs.
Expanding plant warehouses and migrating away from regional Expanding plant warehouses and migrating away from regional
warehouses.
Increasing ASN requirements to improve receiving and put away
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productivity and efficiency.
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INVENTORY (22%)
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INVENTORY (22%)
Improving the forecasting/inventory planning processes.
Reducing the safety stock requirements by reducing the number
of warehouses.
Reducing inventory carrying costs and warehousing space
requirements by:
— Pushing inventory back to suppliers.
— Disposing of excess and obsolete inventory.
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CUSTOMER SERVICE (4%)
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CUSTOMER SERVICE (4%)
Migrating to automated attendants
Outsourcing the functional activities
Encouraging on-line order entry, tracking, etc.
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ADMINISTRATION (2%)
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THANK YOU
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