Improving Warehouse Performance: Best to Focus on Process or Technology?

Executive Overview
Where should warehouse executives put their efforts to get the maximum payoff? Does implementing technology or putting a process program in place yield better results? To answer these questions, ARC Advisory Group conducted a survey that included the question: "Over the last five years, what change led to the greatest improvement in distribution costs per unit shipped?"

When it comes to improving the cost performance of the warehouse, shippers' best results have come from implementing technology; while 3PLs best results have come from process improvement programs. In many instances, technology is just not as viable an improvement strategy for 3PLs as it is for shippers. Further, large 3PLs report that potential customers often look for continuous improvement programs.

In terms of payback, process clearly beats technology. In process programs, over 20 percent of respondents reported being able to launch a program while incurring minimal costs!

The most common technology implementations involved warehouse software. The most common type of process program were continuous improvement programs.

For both technology implementations and process programs, the relative results were associated with warehouse complexity. The more complex the warehouse (as measured by high rates of each or case picking or in terms of the volume of shipments), the more likely the project resulted in greater than 8 percent distribution cost-per-unit savings.

Successful projects tend to be successful in multiple dimensions. In the area of customer service, technology projects results were bimodal. More technology respondents fell at both the top and bottom of the performance improvement scale. Across a number of other benefit areas, both technology and process programs achieved substantial benefits. Looking at these results, it would be difficult to argue which was better.

Table of Contents

• Executive Overview
• Background
• Shippers Focus on Technology; 3PLs on Process
• Technology vs. Process Programs: Which Offers Greater Benefits?
• Payback, Startup Problems, and Continuous Improvement
• Recommendations

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Keywords: Warehouse, Shippers, Distribution, Process Improvement, 3PLs, ARC Advisory Group.