DC Velocity - January 2009

As corporations tighten their belts, distribution operations will likely feel the squeeze. Fifty-seven percent of the 335 survey respondents said they planned to make changes to their distribution operations in response to the poor economic conditions. Of those respondents, 38 percent said they would hold back or delay distribution projects. Another 35 percent planned to lay off employees and workers. However, only 16 percent said they would shutter warehouses or distribution centers. (See Exhibit 1.)

Although some companies are holding off on distribution projects, others are going ahead with investments in software and equipment. Fifteen percent of the survey respondents who planned to make changes to their distribution operations said they would install new material handling equipment to boost productivity. And more than a quarter ( 27 percent) said they planned to install new software applications—again, in hopes of enhancing output.

When asked which types of software they were contemplating buying, 14 percent of the survey respondents mentioned warehouse management systems. Another 8

percent said they planned to buy a transportation management system, while 7 percent said they expected to purchase a labor management package. (See Exhibit 2.)

The survey also asked companies about their plans for outsourcing logistics functions this year. Of the 37 percent of respondents who said they were currently using a third-party logistics service provider (3PL), 57 percent said their 3PL usage would remain the same in 2009. Twenty-seven percent expected to cut back on outsourcing, while 16 percent planned to step up their use of 3PLs.

For all the gloomy projections, the survey findings did

survival strategies

As the economy deteriorated last fall, DCV readers were already plotting their recession survival strategies. Not surprisingly, delaying projects topped the list of planned responses.

Delay distribution projects
Lay off workers
Install new software
Close warehouses
Install new material handling equipment
Outsource more functions
Reduce carrier base
Bring outsourced functions back in house

38% 35% 27% 16% 15% 15% 13% 13%

Note: Survey respondents were allowed to select multiple responses

EXHIBIT 2

software for hard times

Though some companies are putting spending on hold, others are proceeding with plans to install software to boost efficiency. Asked which apps they planned to buy, respondents mentioned warehouse management systems most often.

Warehouse management
Transportation management
Labor management
Supply chain optimization
Inventory planning
Planning and forecasting

14% 8% 7% 5% 5% 5%

reveal one bright spot: Fifty-nine percent of the respondents expected transportation rates to drop this year as a result of declining oil prices.

Overall, the comments of one respondent seemed to sum up the feelings of the group when it came to the challenges of managing in difficult economic times. Said the respondent, “Given the current state of the economy, those that have done things right and have kept a close watch on operations and expenses in good times will still be standing when economic conditions improve. This is the time to re-examine and reinforce the fundamentals of good management.”