2011 Will Test Logistics Skills

A new report evaluating operational performance trends in warehousing, distribution and manufacturing identifies areas targeted for improvement with process upgrades and new equipment/software purchases.

The Integrated Systems and Controls (ISC) Council of Material Handling Industry of America (MHIA) has released the first in a series of Automation Reports titled An Evaluation of Operational Performance in Warehousing, Distribution and Manufacturing.

Looking over the survey as a whole, several key takeaways important to the material handling and logistics industry emerge:

• Many respondents anticipate growth in 2011 due to new customer demands, orders and new business
• At the same time, those respondents are also concerned about their ability to recruit and retain a workforce with the skills required to get the job done
• Although a majority of respondents say they are satisfied with their current systems and processes, an equal number state they are far from excellent in the metrics and operations that matter most to their companies, such as on-time delivery, picking, shipping and receiving
• A significant number of respondents say their operations could be improved with automation, including automatic identification, software, automated storage solutions and robotics.

Half of manufacturers and warehousing/distribution professionals indicate that they benchmark their operations against other companies. Of those that benchmark, 60% benchmark themselves against companies across different industries and 84% benchmark against their competitors. On-time delivery is the most important metric (30%) used for benchmarking, followed by cost per order (21%) and order fill rate (20%). Labor costs, inventory on hand and order accuracy were each cited by more than 10% of respondents.

Cost Control and Efficiency Are Key

Improving operations are top of mind for the coming year. The number one focus is on lowering costs (42%), followed by improving productivity (30%). Improving profit margins, improving inventory management and achieving greater inventory accuracy were each cited by more than 20% of respondents.

The vast majority of manufacturers (89%) and warehousing/distribution professionals (85%) plan to undertake process improvements during the next 12 months. More than half of all respondents (54%) plan to make a capital equipment investment in material handling and logistics equipment, systems and software during the next 12 months. While racks, lift trucks, dock equipment and totes and containers topped the list of planned expenditures for the coming year, more than half of manufacturing and warehousing/distribution respondents voluntarily associated automation with the types of solutions that would improve the performance of their facilities.

Asked to indicate the degree of labor intensity present in their facility, a majority of respondents indicate some level of automation in every key material handling related function or department. However, very few departments are fully automated. Receiving and shipping, order-picking and putaway are the areas of functionality with the least amount of automation in both manufacturing and warehousing/distribution facilities.

When asked to take a longer view of their operations, issues related to recruiting and retaining a qualified skilled workforce loom largest. In fact, when asked what worried them the most besides the economy over the next two to three years, twice as many respondents mentioned workforce and labor issues as mentioned customer demand.

Affinity Research Solutions conducted the survey on behalf of ISC. A total of 655 qualified responses were received, including 446 (68%) respondents from warehousing/distribution and 209 (32%) from manufacturing. Respondents represented industries as varied as food, beverage and tobacco, pharmaceutical, apparel, consumer electronics and machinery. All respondents were involved in purchasing decisions for material handling equipment and related systems, technologies and services.

Eighty percent (80%) worked in large facilities with 100 or more employees while 20% worked in small facilities with fewer than 100 employees. The average facility was 332,000 square feet (warehousing) and 357,000 square feet (manufacturing).

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