Some warehouses perform excellently with 99 percent plus perfect deliveries, motivated staff, and seem to move effortlessly with market changes. Other warehouses stand in stark contrast.

Part 1 of this two-part series outlines an action plan with which you can step by step transform your warehouse into a top performer. Before you start, it is useful to know how mature your warehouse currently is. The online Warehouse Maturity Scan determines the maturity of your warehouse or distribution center by measuring the extent to which you apply best practices in transparency, IT, and chain collaboration. To avoid spoilers, I suggest you first fill in the scan yourself for your own warehouse and only then continue reading.

The Warehouse Maturity Scan has now been completed more than 3,000 times. The data reveals interesting statistics. We see that participants apply on average 38 percent of best practices in their warehouses. When you consider that these practices are generally available and broadly applicable, there is still significant improvement potential here.

One warehouse is more mature than another. The accompanying diagram shows how maturity varies among warehouses. We distinguish three groups:

• Leaders use more than two-thirds of best practices
• Followers use more than one-third of best practices
• Laggards use less than one-third of best practices

We see a relatively small group of 12 percent of warehouses that may count themselves among the leaders, while almost half (47 percent) of warehouses rank among the laggards. We also see this pattern in similar international studies. There is consistently a small leading group and a large tail. Maturity leads to better logistics performance, more flexibility, and lower logistics costs. For leaders, we see potential cost savings of 0-10 percent; for followers, this is 10-20 percent; and for laggards, even 20-30 percent.

As mentioned earlier, participants in the Warehouse Maturity Scan scored an average maturity of 38 percent. Looking at the individual factors in the graph below, we see that maturity in transparency and IT is slightly higher than in chain collaboration. In itself, this is good. Transparency and intelligent IT make the warehouse a strong link, which then makes chain projects more successful.

Mature markets

We also see significant differences in maturity between markets. The most mature markets are: consumer goods, fashion, multimedia, and high-tech. What these four markets have in common is that their products have fairly short life cycles. Consequently, companies are forced to maintain low inventories to minimize the risk of write-offs. Satisfying customers with limited inventories places high logistical demands. These companies need mature logistics operations to remain competitive.

In contrast, the least mature markets are: spare parts, chemicals, industrial products, and DIY. Unlike mature markets, these companies sell products with long life cycles. As a result, they experience less pressure on their logistics.

Industries

The differences between industries are also striking. We see in the accompanying table that retail distribution centers are the most mature, followed by logistics service providers and e-commerce. The least mature distribution centers are found mainly at manufacturers.

In fact, distribution centers become increasingly mature the further downstream they are in the chain. At the end of the supply chain, where companies deliver to end customers, warehouses are typically more complex due to broader assortments and many frequent deliveries. Moreover, their out-of-stock risks are greater. If a retail distribution center cannot supply its stores, this quickly leads to empty shelves and lost sales.

For upstream companies, it is less critical. Their products are still in stock at various companies further down the chain. Another reason for the maturity gap lies in the fact that manufacturers traditionally achieve higher profit margins than retailers. This makes cost efficiency less critical than at the end of the chain.

Logistics service providers are also notably mature. They primarily handle logistics for manufacturers. The significant difference in maturity with manufacturers allows them to create cost advantages over their clients. However, logistics service providers are also increasingly focusing on fulfillment for e-commerce companies. Here, the difference in maturity is less evident. E-commerce is still a relatively young industry, so it will be interesting to see how this develops further.

Highly Competitive Warehouse Management

The book Highly Competitive Warehouse Management by Jeroen van den Berg unravels the secrets of top warehouses and shows how they create competitive advantage for companies. The author presents a systematic but flexible action plan for the step-by-step improvement of warehouses to top level.

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