Andel on Distribution: Warehouse expenses down, IT expenses up. Connection?
By Tom Andel -- Logistics Management, 1/1/2009
The International Foodservice Distributors Association (IFDA) recently released its 2008 Productivity Financial Report. I received an e-mail notification about its availability, and it had a whole long list of bullet points detailing the wealth of data I could mine from it. A few of the bullets looked particularly interesting: inventory turnover, warehouse department expenses, and IT department expenses.
So I sent an e-mail back to IFDA asking for those portions of the full report. They responded very quickly—with the appropriate bar charts. Here’s what I could decipher: Turnover up, warehouse department expenses down, and IT department expenses up. That’s it.
Now anybody with a decent imagination can spin statistics any way they’d like. Having just disconnected from the receiving end of a long political campaign that’s been spewing statistics for about two years, I’m still skittish about stats. I didn’t trust myself to make sense out of these tables, so I went back to IFDA and asked for an analyst to help interpret the significance of these tables. Steve Potter, IFDA’s senior vice president of industry relations, offered some clarity, noting how logically the information from these tables fits together. Here’s what he shared.
Inventory turnover: Many foodservice distributors have taken a closer look at inventory management as a way to reduce working capital, increase warehouse efficiencies, and improve service levels. They’re evaluating product movement by SKU, improving forecasting accuracy, developing more efficient replenishment strategies, and bringing safety stock to realistic levels. So that’s why turnover was up.
Warehouse department expenses (as a percent of net sales): Operational excellence has become the industry’s mantra, Potter explains. Foodservice distributors are focusing heavily on eliminating inefficiencies to reduce operating costs. In the warehouse this effort typically begins with receiving and progresses through putaway, replenishment, selection, and loading to identify nonproductive activities, duplication of effort, bottlenecks, etc. Many distributors have invested in, or upgraded, their inventory management software and warehouse management systems to help identify, track, and correct inefficiencies. So that’s why expenses were down.
IT department expenses (as a percent of net sales): To help control operating costs, distributors are re-vamping or replacing antiquated legacy systems to provide informational links between their sales, procurement, accounting, inventory, warehousing, and transportation functions. Others are purchasing or upgrading their computerized routing systems, adding GPS to their existing capabilities, switching to voice recognition in their warehouse management systems, or adding transportation management systems that include inbound freight controls. And that explains why IT department expenses were up.
Now mind you, these were 2007 numbers cited in the report. The economic landscape has changed quite a bit in the last few months. How is the current economic crisis likely to affect this year’s numbers?
Potter believes we’ll see more of the same. Economic low points like the one we’re in now provide a good opportunity to tighten things up and make the improvements necessary to hit the ground running once the economy improves. “Distributors who have not followed this path may have a tougher time weathering the storm,” he concluded.
Spin? Nope, sounds like straight talk to me. Of course just calling words straight talk isn’t always a winning proposition. Let us know if you’re in the same boat as the people who answered IFDA’s survey. More importantly, let us know if you’re not—and why not. You can reach me at tom.andel@reedbusiness.com.
OSHA steps up ergonomics fines
10/31/2003If at First You Don’t Succeed…
04/20/2009
View All On-Demand Webcasts
