A new study by Boston-based Aberdeen Group has found that when best-in-class companies offer value-added, non-traditional warehousing services, they can lower their costs while improving customer service.

Most warehouses perform such activities as receiving, storing, picking, and shipping. Best-in-class companies, though, go "beyond the four walls" and focus on the customer by engaging in such activities as yard management, online dock scheduling, RFID compliance, compliance labeling, and support for cross docking, said Thomas K. Ryan, vice president of value chain research at Aberdeen and author of the report.

Based on several criteria, the researchers assigned the 137 respondents to one of three performance levels: Laggards (30 percent); industry norm (50 percent); and best-in-class (20 percent). Responses showed that best-in-class companies that engage in value-added warehousing activities enjoyed a 50 percent advantage in four key areas: order fill rate and accuracy, inventory accuracy, warehouse flow-through, and compliance with internal standards. They also scored 20 to 25 percent higher on customer-service and satisfaction measures.

The study also found that best-in-class companies had taken steps to deliver cost-effective customer service through extended warehouse operations. About 60 percent of those companies reported that they had very low total delivered costs. They achieved that in several ways. For example, 39 percent said they had instituted real-time integration between their transportation and warehouse management systems. A similar number had instituted a key performance indicator (KPI) program using automatic data-capture technology to measure the effectiveness of their warehousing activities. (See chart.)

The study concluded that companies need to take three steps to keep pace with their best-in-class competitors. Those include: putting KPI or continuous-improvement programs in place to measure progress and help manage operations; synchronizing warehousing and transportation processes to ensure compliance with customers' instructions; and implementing yard management controls to provide visibility of inventory in the yard and to assist in effective dock management.

For a copy of Aberdeen Group's report, "Extending Warehouse Management Beyond the Four Walls," go to www.aberdeen.com/summary/report/benchmark/EWM_beyond_4_walls_093004.asp