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February 23, 2018

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Distribution center operating costs decline

A survey conducted by the Supply Chain Consortium finds that DC operating costs as a percentage of revenue have dropped over the last two years.

Recent data from the Supply Chain Consortium indicates that more companies are targeting the distribution center (DC) as the place to find and extract savings in their supply chain operation. That's the view of Bruce Tompkins, executive director of the Supply Chain Consortium, a group of some 120 retail and manufacturing companies that share information with one another.

The consortium's most recent Core Benchmarks Report, a compilation of member companies' data, showed that DC operating costs as a percentage of revenue dropped last year. In 2009, the average DC cost as a percentage of revenue was 2.31 percent, down from 2.89 in 2008 and 2.86 in 2007. "With supply chain costs and transportation costs increasing, distribution is an area where companies are able to alleviate some of the financial strain," Tompkins said.

Consortium members are embarking on initiatives to reduce their warehousing costs in a number of areas, including implementing warehouse management systems with enhanced features, such as voice picking technology. They are also automating manual processes with pick-to-light systems and in-line weighing scales and are implementing changes in slotting programs, cycle counting, and cross-docking.

Finally, Tompkins said that although the group does not yet have definitive data on this point, he believes that companies are consolidating distribution centers and making other changes in their distribution networks to drive down costs.

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