The Manufacturing Value Chain

The Manufacturing Value Chain Report: Logistics

Turning To Outsourcing

With transportation so widely regarded as a commodity, it's no surprise that outsourcing is a major logistics strategy. Indeed, among the various logistics functions, transportation and customs services are the most widely outsourced, followed closely by information technology. When turning over transportation or freight-bill payment to outside suppliers, survey respondents are more likely to follow an all-or-nothing strategy. This makes sense considering that respondents rated these outsourcing practices among the most effective. Manufacturers were more lukewarm on the impact of outsourcing IT on reaching their objectives.

Logistics Outsourcing

  Some Outsourcing Extensive Outsourcing
Customs/Export 36% 19%
Transportation (Inbound and/or Outbound) 22% 32%
Information Technology 43% 9%
Warehousing and/or Distribution Centers 28% 15%
Audit and Payment Services for Freight Bills 13% 25%
Facilities Maintenance 28% 8%
Product returns/Transport Handling 12% 4%
Carrier management services 11% 5%

See the full report: The Manufacturing Value Chain Report: The Ties That Bind


Economies Of Scale

Logistics is one area where economies of scale and buying power make a huge difference. About one-third of smaller operations reported shipping and handling costs exceeding 10% of sales. Only one out of 10 sites with more than 250 employees or $100 million in annual sales reported logistics costs in a similar range.

Site's Total Logistics Cost As A Percentage Of Sales

0.0%-2.0% of sales 32.5%
2.1%-5.0% of sales 28.3%
5.1%-10.0% of sales 19.2%
10.1%+ of sales 20.0%

 

Shorter Delivery Times

When it comes to changing customer expectations, what a difference three years makes. The number of manufacturers delivering products in five days or less has grown to 43% from 34% three years ago. Today only 17% require more than 20 days to get product into their customer's hands, down from 29% three years ago. For all facilities the median order-to-delivery time currently stands at seven days. The top performers, those in the upper quartile, report customer order cycle times of three days or less.

Average Customer Order Cycle Time (Days)

  Today 3 Years Ago
0-5 days 42.8% 34.3%
5.1-10 days 25.5% 21.4%
10.1-20 days 15.2% 15.7%
More than 20 days 16.6% 28.6%

Key Performance Indicators Bottom 25% Median Top 25%
Customer order-to-delivery time, days 14 7 3
Supplier delivery dock-to-stock cycle time, hours 12 4 2
Customer order pick-to-ship cycle time, hours 10 4 2
Order fill rate 90.3% 97.7% 99.0%
Total logistics costs as a percentage of sales 10.0% 4.3% 2.0%
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