Core Benchmarks: Logistics Costs Metrics

Transcription

1 Core Benchmarks: Logistics Costs Metrics Facilitated by Steve Simonson and Brian Hudock September 1-2, 2009 Chicago, IL

2 Session Scope Consortium Data for This Session Will Focus on: Supply chain costs Transportation costs Distribution center (DC) costs Supply chain overhead costs and expedited transportation Inventory turns Days purchases outstanding Days receivables outstanding Freight costs: inbound and outbound Copyright 2009 Supply Chain Consortium. All rights reserved. 2

3 Supply Chain Costs Average Supply Chain Costs* as a Percentage of Revenue by Segment Top 2nd Apparel, Fabric and Accessories 3.6% 5.2% Automotive, Truck and Vehicles 3.0% 5.7% Beauty, Health and Wellness 2.0% 4.5% Department Store and Discount 2.3% 4.5% Electronics and Electricals 3.0% 5.0% Food and Beverage 5.0% 6.0% Hobby, Toys, Arts, Crafts and Sporting Goods 3.6% 4.4% Home Products/Furniture/Appliances 4.1% 5.0% * Supply chain costs are defined as transportation, DC, 3PL and overhead costs. 3rd 5.7% 5.9% 8.7% 6.6% 6.9% 7.8% 5.6% 6.3% 4th 9.8% 6.0% 9.2% 9.8% 10.0% 10.8% 6.7% 7.2% Supply chain costs are steadily increasing over time, despite efforts to hold the line. As supply chain costs grow relative to revenue, more pressure has been put on cost control efforts. Few companies can accept service level erosion or inventory growth in exchange for reducing costs. Are your costs going up while your revenue is decreasing? Copyright 2009 Supply Chain Consortium. All rights reserved. 3

4 Transportation Costs Average Transportation Costs as a Percentage of Revenue Top 2nd 3rd 4th Apparel, Fabric and Accessories 1.3% 1.7% 6.0% 4.1% Automotive, Truck and Vehicles 1.2% 1.5% 2.0% 3.0% Beauty, Health and Wellness 2.4% 3.9% 5.3% 5.5% Department Store and Discount 1.4% 1.7% 3.0% 6.6% Electronics and Electricals 1.9% 2.4% 2.8% 3.5% Food and Beverage 1.1% 1.6% 5.6% 10.0% Hardware and Home Improvement 3.2% 3.5% 5.1% 10.0% Hobby, Toys, Arts and Crafts and Sporting Goods 2.7% 3.1% 3.3% 4.3% Home Products/Furniture/Appliances 3.0% 3.2% 3.6% 4.8% Transportation costs have been particularly hard to control with fluctuating fuel prices and changing capacity issues. In spite of tremendous efforts to reduce costs, some respondents are still experiencing double-digit increases in transportation costs as a percentage of revenue. What are you doing to manage and plan your transportation? Anyone altering their supply chain based upon performance metrics? Copyright 2009 Supply Chain Consortium. All rights reserved. 4

5 Distribution Center Costs Average DC Costs as a Percentage of Revenue Top 2nd 3rd 4th Apparel, Fabric and Accessories 0.9% 1.2% 2.9% 3.8% Automotive, Truck and Vehicles 2.2% 3.0% 4.0% 6.5% Beauty, Health and Wellness 2.1% 3.2% 3.4% 10.8% Department Store and Discount 1.7% 1.8% 2.0% 4.8% Electronics and Electricals 0.7% 1.1% 1.6% 4.6% Food and Beverage 1.1% 1.7% 2.8% 10.0% Hardware and Home Improvement 4.8% 5.9% 6.0% 7.6% Hobby, Toys, Arts and Crafts 2.2% 2.5% 3.1% 4.7% Home Products/Furniture/Appliances 2.0% 2.9% 4.7% 12.3% There is a higher degree of variability in DC costs as a percentage of revenue than with transportation costs. Some companies strategies increase the cost of distribution in order to significantly reduce transportation costs and improve customer service, while other companies are focused on a strategy of improved DC productivity. In general, the data for DC costs as a percentage of revenue are trending downward compared to previous years data. Copyright 2009 Supply Chain Consortium. All rights reserved. 5

6 Distribution Center Costs Average Percentage of Cost for DC Processes Management labors costs 7.3% Receiving 11.9% Quality inspection 1.8% Putaway 7.3% Picking 24.3% Replenishment 6.4% Packaging 8.8% Value-added services 8.0% Shipping 15.1% Cycle counting 2.1% Administrative labor costs 7.0% Average Percentage of DC Overhead Costs 25% Labor Facility and utilities Fixed material handling Mobile material handling Information techology Other 2% 2% 4% 8% 59% In the future, what distribution costs do you expect will have the most variability? Copyright 2009 Supply Chain Consortium. All rights reserved. 6

7 Supply Chain Overhead Costs and Expedited Transportation Supply chain overhead costs as a percentage of revenue Expedited transportation as a percentage of revenue Retail 1.52% 0.42% Manufacturing 1.76% 0.53% There is some variation in supply chain overhead costs and expedited transportation as a percentage of revenue between retail and the manufacturing companies. Manufacturing companies have supply chain overhead costs percentages that range from 6.7% to 0.1%, with an average percentage of 1.8%. Retail companies have a much smaller range and an average of 1.5%. Manufacturing companies also have a higher percentage of expedited transportation (.53%) as a percentage of revenue than retail companies (.42%). Copyright 2009 Supply Chain Consortium. All rights reserved. 7

8 Transportation Costs Percentage of Total Spend per Mode Ocean, 9.9% Boxcar, 2.3% Intermodal, 5.2% Parcel, 13.7% Truckload, 43.8% Air, 8.5% LTL, 16.6% Where are you shifting your freight? Why? Copyright 2009 Supply Chain Consortium. All rights reserved. 8

9 Financial Inventory Turns Apparel, Fabric and Accessories Automotive, Truck and Vehicles Beauty, Health and Wellness Department Store and Discount Electronics and Electricals Food and Beverage Hardware and Home Improvement Hobby, Toys, Arts, Crafts and Sporting Goods Home Products/Furniture/Appliances Inventory Turns By Industry Segment Inventory Turns Financial inventory turns are based on inventory dollar value at a specific point in time compared to the cost of goods sold (COGS) at that same time. According to survey responses, the three industries with the highest inventory turns are (1) home products/furniture/appliances, (2) electronics and electrical, and (3) food and beverage. Copyright 2009 Supply Chain Consortium. All rights reserved. 9

10 Days Purchases Outstanding Number of Days Retail Days Purchases Outstanding Manufacturing Days purchases outstanding is a company s average payable period. The days purchases outstanding is higher for retail companies (41 days) than for manufacturing companies (29 days). Copyright 2009 Supply Chain Consortium. All rights reserved. 10

11 Days Receivables Outstanding Days Receivables Outstanding Number of Days Retail Manufacturing Days receivables outstanding is the average number of days that a company takes to collect revenue after a sale has been made. Manufacturing companies days receivable outstanding is greater than the days purchases outstanding, while the opposite is true for retail companies. Copyright 2009 Supply Chain Consortium. All rights reserved. 11

12 Inbound Freight Costs Inbound Freight Costs as a Percentage of Purchases 8% 8% 38% Less than 1% 1% to 3% 3% to 5% Greater than 5% 46% The average inbound freight cost as a percentage of purchases for all survey participants is 1.2%. As with outbound freight, manufacturing and retail companies averages are very similar. Copyright 2009 Supply Chain Consortium. All rights reserved. 12

13 Outbound Freight Costs Outbound Freight Costs as a Percentage of Gross Sales 7% 20% 33% 40% Less than 1% 1% to 3% 3% to 5% Greater than 5% The average outbound freight cost as a percentage of gross sales is slightly more than 2%. Manufacturing and retail companies have virtually the same average cost percentage. Copyright 2009 Supply Chain Consortium. All rights reserved. 13

14 Discussion Points Group Open Discussion Questions What other supply chain logistics cost metrics do you monitor and track performance against? Which metric(s) is key to managing and planning your business? How have you balanced cost trade-offs in your supply chain between transportation, distribution and other costs, such as tariffs and duties? What trends do you see in the future for managing supply chain costs relative to revenue? Copyright 2009 Supply Chain Consortium. All rights reserved. 14