Study offers "snapshot" of private warehouses

Staff -- Logistics Management, 5/1/2001

A recent survey of private warehouse operators provides a snapshot of this important segment of the warehousing industry. In their report, "An Assessment of Private Warehousing," Thomas Speh of Miami University in Oxford, Ohio, and Arnold Maltz of Arizona State University surveyed 50 private warehouse operations about their operating practices. (Private warehouses are owned and operated by manufacturers, retailers, and distributors.) Here are some of the findings:
Labor. Three-fourths (75 percent) of the private warehouse operators surveyed said their operations were non-union. The study participants said their average annual hourly-worker turnover was 16 percent. Eighty-three percent of those surveyed said they provided incentive pay for their hourly employees.
Metrics. The study found that inventory accuracy (76 percent) was the metric most commonly employed to gauge performance. Next in frequency were measurements of total warehouse costs and picking productivity, each used by 72 percent of the respondents. About 65 percent said they tracked warehousing costs as a percentage of sales.
Capital spending. Private warehouse operators said they spent the majority of their capital dollars on handling and automation equipment. On average, 44 percent of capital spending went for such equipment. (See the accompanying table.)
Technology. The most popular technology used in the warehouses surveyed was the bar-code label, employed by 88 percent of the survey respondents. Another 82 percent reported using radio-frequency technology, and 80 percent had installed warehouse-management software.
DC networks. As for the structure of their distribution networks, 59 percent of the private warehouse operators surveyed said they had in-plant storage locations. The average number of in-plant facilities was six and the average size was 1.5 million square feet. Some 61 percent of the respondents reported that they operated free-standing field warehouses. The average number of such facilities operated was 5.5 and the average size was 1.72 million square feet.
Private vs. public. Companies cited several reasons for operating their own warehousing facilities rather than using a public warehouse or hiring a third party. Almost one-fourth (24 percent) said that a private warehouse allowed them to have more control over service quality. Another 14 percent said that private warehousing was vital to their marketing efforts. And 13 percent said private warehousing cost less than using a third-party logistics company.
Challenges. When asked about the biggest challenge confronting them in the future, 33 percent cited difficulty in finding high-quality hourly employees. The second biggest challenge, cited by 13 percent, was operating the warehouse efficiently.