Public Warehousing As Strategy to Provide Capacity Crunch Relief
It’s long been said that warehousing is simply “transportation at zero miles an hour,” and never more than in today’s ongoing transportation capacity crunch has that idiom rung true. As the national driver shortage and increased driving regulations continue to pinch transportation capacity out of the marketplace, more and more companies are looking to find creative ways to manage customer service logistics. For many companies, the first step in mitigating truckload transportation risk has been to move to domestic intermodal shipping and reduce the dependence on long haul trucking. But how many companies have reconsidered their inventory positioning as a mitigation strategy?
Public Warehousing Services
Public Warehousing is a third party logistics service wherein customers enter into short term contracts to store, segregate, manipulate, and handle goods in a multi-client environment. There can often be upwards of 30-40 customers represented in one Public Warehouse. Facilities should be clean, secure , and certified by independent auditing bodies such as AIB or SQF. The vast majority of Public Warehouses provide Warehouse Management Systems (WMS) capabilities that are highly flexible, provide “near real time” visibility and quick integration for communications like EDI. When a company uses a Public Warehouse as a distribution strategy, it is partnering with a provider with the most current technology, repeatable business processes, and the ability to customize a solution to fit specific business needs, all without signing a long term contract or taking on the capital investment risk of acquiring real estate. Many multi-client facilities also offer asset transportation services, allowing for faster turnaround time and better visibility of product as it leaves the facility.
Leveraging Public Warehousing : Where Public Warehousing Can Help
Tight capacity has spurred many companies to flock towards intermodal transportation in an effort to avoid service delays or bursting their budgets. This influx of traffic, coupled with the ‘slow’ nature of rail and water, mean intermodal is not a magic solution to end all troubles. “If your business is suffering from prolonged pain caused by tight capacity, you need to look outside of your ‘moving’ options and also consider your staging strategy to offer relief,” offers Blair Thomas, Director of Customer Care at Columbian Logistics. Public warehousing can be a viable option, providing solutions to:
Last winter’s heavy snowfall and horrible driving conditions caused widespread delays and service disruptions. Holding just a few days of supply in a public facility could have buffered many service outages. Once the adverse weather breaks and transit times return to their normal levels, the public warehouse would no longer be necessary, allowing the shipper to draw down the inventory and return to the baseline distribution model. This same benefit holds true in the event of a significant driver or capacity shortage in the long haul trucking market.
In addition to finished goods storage, many firms use public warehouse space to increase customer service statistics in B-2-B environments. Let’s say, for example, that a maker of the key ingredient in a sports recovery drink makes its product in rural Utah. Using a traditional freight model, running customer orders straight off the line and onto truckload carriers could be a risky proposition, especially as capacity continues to tighten and ad hoc freight prices rise significantly. Alternately, the supplier could hold a reserve inventory in a multi-client near the customer site and use local shuttling services to keep the customer’s line running. Separating the line haul from the customer delivery allows for a more deliberate approach to risk mitigation for each activity. Reducing the time sensitivity of the line haul could even allow for a switch from the truckload market to a less costly intermodal solution.
Break the LTL Habit: Pool Distribution
A final example of leveraging a Public Warehouse would be in the pool distribution model. Many manufacturers in the candy and snack business often employ this strategy to service hard to reach areas of the country, like peninsulas (Florida or Michigan) or remote areas (Dakotas or Upper New England). Rather than using costly LTL services to distribute to those areas, many companies send full truckloads into a public warehouse, allowing that provider to break up the truck into separate customer orders, and then deliver those orders on a set schedule, often referred to as a “Sailing Schedule.”
Cost and Benefits
Cost is of course the first factor when analyzing distribution models. Public warehouse costs are regionally variable, and can be very reasonable, often low enough in smaller markets to compare favorably to large-market rates. Handling costs can be mitigated by not requiring labor intensive additional services such as case or each picking, labeling, or kitting. Those services are often available and can be very cost effective, but they’re certainly not mandatory. If a company does need packaging or other value-added services (VAS), utilizing those services at the warehouse can eliminate the cost of transportation to another offsite provider. The final two factors to consider in a public warehouse decision are tried and true evaluations: what does a customer service interruption cost me, and what is it worth to not pay for services until I’ve used them? The first question evaluates your customer service reputation as much as your P&L statement, and the latter question refers to the old adage that says “cash is king,” and holding onto your cash for as long as possible has legitimate value.
Whether related to transportation capacity risk mitigation, winter weather buffering, highly seasonal demand (think cranberries in autumn or #2 pencils at back-to-school time), or any other factors, Public Warehouses can serve as a relief valve for a short or long term solution, and be a valuable part of your strategic plan.
Interested in learning more about Public Warehousing? Contact Blair Thomas, Director of Customer Care at email@example.com