Latest logistics costs

1. Logistics Cost and Service 2014

2. The Establish Davis Database
•Brief History/Description
–Since 1974 Establish Davis Database contains logistics costs (transportation, warehousing, customer service/order entry, administration, and inventory carrying costs) and service performance levels for many industries/groups.
–The submissions are annually summarized to track logistics costs and service performance levels and trends.
•Why Companies Benchmark?
–To identify opportunities and trends (cost and service performance drivers) in their logistics costs.
–To know where to focus next to improve company’s logistics network from the prospective of cost and service.

3. The Establish Davis Database
Participantsconfidentialreportsinclude:
Costcomparisonbygeneralindustrygroup,productvalue, weightrangeandsalesrevenue.

4. Annually, we summarize the data, track it over time, and report the
results.
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1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014
Cost As a Percent of Sales
% of Sales
Logistics Cost as a Percent of Sales
The Establish Davis Database
9.34%
Domestic
Manufacturing
Shift to Offshore
Manufacturing
Technology Advances

5. Establish Davis Database -Average Company2014 -Key Findings
Logistics costs for the average company in the database are 9.34 percent of sales and $69.74 per hundredweight shipped.
Logistics costs increased by 11 percent from 2013 to 2014. Transportation cost is driving the increase.
Companies with higher product values continue to have lower logistics costs.
Smaller companies continue to have higher logistics costs.
Service performance levels have improved this year.

6. The Establish Davis Database -Average Company
2014 Logistics Costs
Cost
% of Sales
$/CWT
Transportation
4.43%
$36.42
Warehousing
1.99%
$16.16
Customer Service
0.41%
$1.92
Administration
0.30%
$1.15
Inventory Carrying
2.22%
$14.09
TotalLogistics Costs
9.34%
$69.74

7. Cost as a Percent of Sales (9.34%)
Customer Service/
Order Entry
4%
Warehousing
21%
Administration
3%
Inventory Carrying
24%
Transportation
47%

8. Cost per Hundredweight (CWT – $69.74)
Warehousing
23%
($16.16)
Customer Service/
Order Entry
3%
($1.92)
Administration
2%
($1.15)
Inventory Carrying
20%
($14.09)
Transportation
52%
($36.42)

9. Cost as a Percent of Sales
Cost per Hundredweight
Warehousing
21%
Customer Service/
Order Entry
4%
Transportation
47%
Administration
3%
Inventory Carrying
24%
Warehousing
23%
Customer Service/
Order Entry
3%
Transportation
52%
Administration
2% Inventory Carrying
20%

10. The Establish Davis Database -Average Company
2014 Logistics Costs
Cost as
% of Sales
Transportation
4.43%
Warehousing
1.99%
Customer Service
0.41%
Administration
0.30%
Inventory Carrying
2.22%
TotalLogistics Costs
9.34%

11. 0
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2014
Transportation
Warehousing
Customer Service
Administration
Inventory Carrying
Cost asa Percent of Sales Over Time
Cost as a Percent of Sales

12. 0
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2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Cost as a Percent of Sales
Cost as a Percent of Sales Over Time
2007 2008 2009 2010 2011
Service Warehousing Transportation
2003 2004 2005 2006 2007 2008 2009 2010 2011
Administration Customer Service Warehousing Transportation
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2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Inventory Carrying Administration Customer Service Warehousing Transportation
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2001 2002 2003 2004 2005 2006 2007 2008 Inventory Carrying Administration Customer Service Warehousing 0
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2001 2002 2003 2004 Inventory Carrying Administration

13. The Establish Davis Database -Average Company
2014 Logistics Costs
Cost
$/CWT
Transportation
$36.42
Warehousing
$16.16
Customer Service
$1.92
Administration
$1.15
Inventory Carrying
$14.09
TotalLogistics Costs
$69.74

14. $0
$10
$20
$30
$40
$50
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Transportation
Warehousing
Customer Service
Administration
Inventory Carrying
Cost per HundredweightOver Time
Cost per Hundredweight

15. $0
$20
$40
$60
$80
$100
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Cost per Hundredweight
Cost per HundredweightOver Time
2007 2008 2009 2010 2011
Service Warehousing Transportation 2003 2004 2005 2006 2007 2008 2009 2010 2011
Administration Customer Service Warehousing Transportation 0
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10
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Inventory Carrying Administration Customer Service Warehousing Transportation 0
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2001 2002 2003 2004 2005 2006 2007 2008 Inventory Carrying Administration Customer Service Warehousing 0
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2001 2002 2003 2004 Inventory Carrying Administration

16. 0
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12
<$100 $100 - $500 $500 - $2,000 >$2,000
12.88
10.08
7.40
4.49
Company Size
Smaller companies continue to have higher logistics
costs.
Cost as a Percent of Sales
Annual Sales ($ MM)

17. Cost as a Percent of Sales
Product Value in $/Pound
Product Value
Companieswithhigherproductvaluescontinuetohavelowerlogisticscosts.
0.002.004.006.008.0010.0012.00<$5$5 - $10$10 - $20>$2010.6411.726.464.49

18. 2014 Measurements
Total order cycle time -6 days
Product Availability (Shipped Complete)
Orders92% Lines93%
Units93%
Customer Service Levels

19. FULL DATABASE
Average Performance Reported
02030405060708091011121314Total Cycle Time (Days)878889987710116Product Availability(% Orders)88859188848390919293858492(% Lines)95919492899392949595969593(% Units)93939194909494959595949193

20. What are companies doing to control/reduce costs?

21. LOGISTICS NETWORKS

22. LOGISTICS NETWORKS
Identifying the correct number of warehouses/DCs to reduce transportation costs and improve service performance levels.
Reconfiguring networks as a result of:
―Acquired/merged organizations.
―Shifts in the manufacturing and customer base.
―Changes in customer service requirements.

23. TRANSPORTATION
(47% of the Logistics Spend)

24. TRANSPORTATION
Mitigating carrier increases by renegotiating agreements.
Reevaluating ordering patterns to identify customer order minimums.
Reevaluating ordering patterns to identify consolidation, pool point, and cross dock opportunities.
Shipping intermodal/rail instead of truckload.
Separating embedded transportation costs from the landed cost of materials/inventory from sources, to:
―Identify,evaluateandcontrolcosts.
―Leverageadditionalvolumes.
Acquiring/upgrading transportation management systems (TMS) to maximize control and cost reduction opportunities.

25. WAREHOUSING
(21% of the Logistics Spend)

26. WAREHOUSING
Redesigning warehouses to increase storage capacity and improve efficiency.
Evaluating warehouse processes and procedures to identify opportunities.
Acquiring new and used material handling equipment to improve efficiency.
Evaluating the services of third party providers (3PL).
Adding/upgrading standalone and SaaS (software as a service) Warehouse Management Systems (WMSs).

27. INVENTORY
(24% of the Logistics Spend)

28. INVENTORY
Improving the forecasting/inventory planning processes.
Reducing the safety stock requirements by reducing the number of warehouses.
Reducing inventory carrying costs and warehousing space requirements by:
―Disposing of excess and obsolete inventory.
―Re-profiling inventory by location.

29. CUSTOMER SERVICE
(4% of the Logistics Spend)

30. CUSTOMER SERVICE
Migratingtoautomatedattendants
Outsourcingthefunctionalactivities
Encouragingon-lineorderentry,tracking,etc.

31. ADMINISTRATION
(3% of the Logistics Spend)

33. www.establishinc.com/ 201-283-9000
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