DC Velocity - May 2014

s p ec i a lr ep or t

ANNUA L M ET R I C S SU RV EY

44 DC VELOCITY MAY 2014 www.dcvelocity.com year. “Major opportunity” performers—those whose facilities’ performance ranked in the bottom 20 percent of survey respondents, and therefore have the most to gain—improved and/or maintained performance against 86 percent of the metrics in this year’s study.

The biggest gains for that group came in financial and productivity-related measures.

The net result of these strides was to narrow the performance gap between themselves and the best-in-class performers. Exhibit 2 identifies the metrics against which “major opportunity” respondents showed the greatest gains over the 2013 study. As it turned out, when it came to the same four metrics, the best-in-class respondents showed only incremental improvements or actually saw performance slip, further eroding their lead.

FOR EVERY TO, THERE IS A FRO

Although we’ve come to expect overall performance improvements from year to year, it’s important to note that those gains sometimes come at a cost. As companies focus in on a new area, it’s all too easy to let performance in another area slide. If managers don’t intervene, performance tends to erode ever so slowly over time. And in some cases, the slippage can be significant.

For that reason, the study also looked at areas where
performance has slipped the most—the so-called “points
of pain.” As mentioned earlier, supplier-related metrics
took a big hit this year, with performance against the
majority of these measures either remaining largely
unchanged or dropping. In fact, of all the metrics stud-
ied, performance against the “supplier orders received
per hour” metric deteriorated the most, with perfor-
mance by best-in-class respondents dropping over 60
percent from 2013 levels.

Other “points of pain” identified this year were annual workforce turnover, inventory shrinkage as a percentage of total inventory, and days of finished-goods inventory on hand. (See Exhibit 3.)

IT’S A TOSS-UP

Overall, it appears that while warehouses and DCs at all levels are making performance gains, the race to the top is getting tighter. The “major opportunity” respondents continue to make great strides in closing the performance gap. However, best-in-class respondents are still able to do a better job of managing drops in their performance compared with other respondents. Whether the momentum can be sustained or not, only time will tell.

In the meantime, we invite you to send us your comments, suggestions, and insights into the research and your own use of measures. We can be reached by e-mail: Joe Tillman at joseph.tillman@tsquaredlogistics. com, Karl Manrodt at karl@manrodt.com, and Donnie Williams at donnie.williams@gcsu.edu.

About the authors: Joseph Tillman is the founder of TSquared Logistics. Karl Manrodt is a professor at Georgia Southern University. Donnie Williams is an assistant professor at Georgia College and State University.

Metric Major opportunity Typical Best in class Median 2014 Median 2013 Distribution costs per unit shipped > $5.00 >= $0.69 and < $1.45 < $0.30 $0.86 $1.50 Distribution costs as a of sales > 10% >= 3.2% and < 5.4% < 2% 4% 3.9% Cases picked and shipped per hour < 28 >= 60 and < 100 >= 180 82.5 67.5 Back orders as a of total orders > 8% >= 1.2% and < 4% < 0.14% 2% 3%

Note: Survey responses have been divided into quintiles to make it easier for companies to determine where they stand in comparison with other operations. For example, the “best in class” companies represent the top 20 percent of all respondents, while “major opportunity” companies represent the lowest-performing 20 percent.

EXHIBIT 2

Seizing the opportunity: Where lagging performers made the biggest gains

Metric Major opportunity Typical Best in class Median 2014 Median 2013 Supplier orders received per hour < 1 >= 3 and < 6. 6 >= 15 5 4 Annual workforce turnover > 16.46% >= 4.26% and < 10% < 0.18% 5.3% 5% Inventory shrinkage as a of total inventory> 1.006% >= 0.1% and < 0.5% < 0.0158% 0.2% 0.3% Days on hand – finished-goods inventory > 80 >= 30 and < 41. 4 < 15 31. 7 30

Note: Survey responses have been divided into quintiles to make it easier for companies to determine where they stand in comparison with other operations. For example, the “best in class” companies represent the top 20 percent of all respondents, while “major opportunity” companies represent the lowest-performing 20 percent.