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Establish davis-logistics-cost-and-service-presentation-2014
The document summarizes findings from the Establish Davis Database regarding average logistics costs and performance for companies in 2014. It finds that: - Total logistics costs for the average company were 9.34% of sales and $69.74 per hundredweight shipped. Transportation costs made up the largest portion at 47% of total costs. - Logistics costs increased 11% from 2013 to 2014, driven primarily by increases in transportation costs. - Smaller companies and those with lower product values tend to have higher relative logistics costs. - Service performance levels improved in 2014, with reductions in order cycle times and increases in on-time delivery rates.
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Establish davis-logistics-cost-and-service-presentation-2014
- 1. Logistics Cost andService 2014
- 2. The Establish DavisDatabase •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 DavisDatabase Participantsconfidentialreportsinclude: Costcomparisonbygeneralindustrygroup,productvalue, weightrangeandsalesrevenue.
- 4. Annually, we summarizethe data, track it over time, and report the results. 0 2 4 6 8 10 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 DavisDatabase -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 aPercent 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 aPercent 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 DavisDatabase -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 1 2 3 4 5 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Transportation Warehousing Customer Service Administration Inventory Carrying Cost asa Percent of Sales Over Time Cost as a Percent of Sales
- 12. 0 2 4 6 8 10 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 0 2 4 6 8 10 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Inventory Carrying Administration Customer Service Warehousing Transportation 0 2 4 6 8 10 2001 2002 2003 2004 2005 2006 2007 2008 Inventory Carrying Administration Customer Service Warehousing 0 2 4 6 8 10 2001 2002 2003 2004 Inventory Carrying Administration
- 13. The Establish DavisDatabase -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 2 4 6 8 10 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Inventory Carrying Administration Customer Service Warehousing Transportation 0 2 4 6 8 10 2001 2002 2003 2004 2005 2006 2007 2008 Inventory Carrying Administration Customer Service Warehousing 0 2 4 6 8 10 2001 2002 2003 2004 Inventory Carrying Administration
- 16. 0 2 4 6 8 10 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 aPercent 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 Totalorder cycle time -6 days Product Availability (Shipped Complete) Orders92% Lines93% Units93% Customer Service Levels
- 19. FULL DATABASE AveragePerformance Reported 02030405060708091011121314Total Cycle Time (Days)878889987710116Product Availability(% Orders)88859188848390919293858492(% Lines)95919492899392949595969593(% Units)93939194909494959595949193
- 20. What are companiesdoing to control/reduce costs?
- 21.
- 22. LOGISTICS NETWORKS Identifyingthe 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% ofthe Logistics Spend)
- 24. TRANSPORTATION Mitigating carrierincreases 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% ofthe Logistics Spend)
- 26. WAREHOUSING Redesigning warehousesto 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% ofthe Logistics Spend)
- 28. INVENTORY Improving theforecasting/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% ofthe Logistics Spend)
- 33.