Industry Trends: Bringing Value to the Table: How Today's Logistics Service Providers Stay One Step Ahead

October 23, 2005 - Material Handling Management Magazine

Written by: David Drickhamer

Logistics service providers make a living by responding to the supply-chain needs of multiple customers in multiple industries. These wide and varied demands have made them some of the most sophisticated and flexible warehouse and distribution center managers in the country.

Logistics service providers are responding to the same demands that are forcing changes within the internal distribution networks of retailers and manufacturers. Customer cries for end-to-end supply-chain solutions and ever better inventory visibility have spurred logistics company mergers and acquisitions at the global level. At the contract level, relationships are evolving from highly detailed, three-year contracts, to shorter term, flexible arrangements that are more responsive to business changes, says Adrian Gonzales, a director with ARC Advisory Group (Dedham, Mass.), a supply-chain research firm that monitors the industry.

Logistics service providers are also using lean techniques and Six Sigma programs to eliminate wasteful activities and refine business processes, and they're always investing in new automation and information technology. All so they can deliver the annual cost savings written into customer contracts.*

At the other end of the industry spectrum, many smaller players are carving out a market niche by zeroing in on special customer needs. Fidelitone Logistics (Wauconda, Ill.) operates around 500,000 sq. ft. of warehouse space in 3 locations. It handles the repair parts distribution program for the Black & Decker family of tool brands (shipping more than 13 million parts per year), and the Internet/catalog distribution activities for several retailers. Whether it's a repair part or an Internet order, the company strives to ship everything in 24 to 48 hours.

To achieve such performance objectives requires a mastery of the basics. Fidelitone Logistics combines warehouse automation, radio frequency processing, in motion scanning and weighing, carousels, automated sortation and various productivity improvement programs. Tom Giovingo, Fidelitone Logistics' executive vice president, talks about being efficient with order waves, and regularly re-profiling SKUs so that they are correctly positioned within warehouse zones, the fast and slow movers, and the medium movers as well.

"As much as it sounds normal-the normal way of doing things, the basic way of doing things-everybody talks it. Not everybody pulls it off," says Giovingo.

The company recently acquired 51,000 sq. ft. of space that will allow Fidelitone Logistics to reconfigure part of its current space with taller racks, narrower aisles and new picking equipment, while it continues to make shipments for customers. Like many warehouse investments today, the focus is on increasing cube utilization.*

*Excerpts from the October 2005 article.