DC Velocity - January 2011

organizations’ spending plans.

Among those respondents who expect to boost their spending, the biggest share— 45 percent—estimated their expenditures would increase by 3 to 5 percent. About 28 percent projected an increase of 5 to 9 percent, while 10 percent put the increase at just 1 to 2 percent. Only 17 percent said their logistics spending would jump by 10 percent or more in 2011.

When asked specifically about their plans for buying transportation services, 45 percent of the respondents said they expected their expenditures to increase. Another 40 percent said their spending would remain the same, 6 percent predicted a decrease, and 9 percent said they weren’t sure. It’s worth noting that regardless of their spending plans, survey respondents largely agreed on where energy costs were headed. Eighty-four percent said they believed fuel prices would rise in 2011.

As for what kinds of transportation services respondents plan to buy in 2011, less-than-truckload (LTL) topped the list. Sixty-six percent of survey takers said they would be contracting for LTL service. That was followed by truckload service ( 61 percent) and small-package service ( 55 percent). (See Exhibit 1.)

Survey respondents were also asked about their plans for outsourcing logistics services in the coming year. Of the 35 percent of respondents who currently use third-party logistics service providers (3PLs), 53 percent said they expected their use of third-party services to remain unchanged from 2010 levels. Thirty-five percent said they expected to increase their use of contract logistics services, while 12 percent said they planned to cut back on outsourcing.

When asked what type of material handling equipment they planned to buy during 2011, 43 percent mentioned racks and shelving. Next on the list were batteries and battery handling equipment ( 39 percent) and safety products ( 34 percent).

As for planned software purchases, it appears that readers are sticking with the tried and true. Twenty-eight percent of survey respondents said they intended to buy a warehouse management system (WMS), while 27 percent have set their sights on a new transportation management system (TMS). Also on the list were inventory planning software ( 21 percent) and supply chain optimization applications ( 20 percent).

PUTTING THE BRAKES ON SPENDING

Although the survey respondents remain guardedly optimistic about the future, it appears they aren’t ready to throttle down their cost control efforts just yet. The majority of survey takers indicated they would continue to seek ways to trim distribution expenses in 2011.

As for how they plan to go about it, the largest share of
respondents said they would look to re-engineer their

When asked what types of transportation services they planned to buy in 2011, DCV readers put LTL motor freight at the top of the list.

EXHIBIT 1

Taking the truck route

Type of service

Less-than-truckload motor freight Truckload freight Small package Air freight Maritime/Ocean Rail/Intermodal Express/Expedited/Time-critical Private fleet tractors and/or trailers Transportation-based third-party logistics services Barge

of respondents*

66

61

55

40

36

34

32

30

29

6

EXHIBIT 2

War on costs continues

Although DCV readers haven’t abandoned traditional cost-cutting strategies like shipment consolidation, they’re increasingly turning to software to uncover new savings opportunities.

Cost-cutting action of respondents*

Consolidate more shipments into truckloads 41

Renegotiate rates with carriers 41

Use software for operational improvements 31

Cut back on express shipments 28

Redesign supply chain network 23

Use fewer carriers 19

Reduce shipping frequency to customers 17

Shift more freight from truck to rail 16

Shift more freight from air to ocean 12

Lay off workers 10

Outsource more distribution tasks 9

Eliminate or cut back use of 3PLs 7

Use fewer DCs 4

Set up more DCs 5

*Note: Survey respondents were allowed to select more than one response.

trucking spend. Forty-one percent said they planned to
consolidate more shipments into full truckloads. The same
percentage of respondents said they would seek to renego-
tiate rates with their carriers. (See Exhibit 2.)

The survey also showed that respondents will be adding some new weapons to their cost-cutting arsenal this year. While many will continue to pursue traditional approaches like load consolidation, it appears some have decided the time has come to deploy computer power and intelligence in their battle to contain distribution costs. Nearly one-third of respondents ( 31 percent) plan to invest in software to analyze their operations for additional savings opportunities. ;