Dukal Corp., a Hauppauge, N.Y.-based medical products manufacturer, had a serious congestion problem -- so bad, in fact, that John Grasso, vice president of operations, describes it as a nightmare. "We were over capacity due to significant internal growth and a recent acquisition," he explains. "Our distribution operation was located in three facilities and had over 1,000 [pallets] in the aisles." It was a classic logistics challenge, made all the more dire because Dukal feared the impact the congestion was having on customer service.
Grasso studied the economics of relocating locally, but quickly realized that the cost of operation and transportation on Long Island was very high. That's when he began to consider the idea of moving to a third-party logistics provider (3PL). "The 3PL concept interested me because I did not want to invest in or manage a remote location, and I needed a fast transition." After studying several geographical areas, Grasso ultimately chose to relocate its New York warehouses to Memphis, Tenn., where distribution is now managed by Ozburn-Hessey Logistics.
Memphis, Grasso explains, was chosen because it offers the lowest cost and helped Dukal reduce its average inbound and outbound transit times. Inbound times, for instance, were shortened by a week. Whereas it used to take up to two weeks to fill an order, today most orders are handled and delivered within days, Grasso says.
|John Grasso, vice president of operations, Dukal Corp|
After the first nine months of using a 3PL, Dukal is now able to ship 99.9% of its orders within two business days. Inventory accuracy is also at 99.5%, while first-count receiving accuracy is at 99.71%.
"Our transition from an internally managed distribution center on Long Island to a 3PL in Memphis was seamless," Grasso notes. The key, he adds, was "detailed due diligence and advance planning. I needed to understand my distribution operation before I asked someone else to run it for me. This took two months of data gathering and analysis," where he looked at things like order cycles, orders booked and shipped, and case counts per day. Building an information database allowed Dukal to provide OH Logistics with everything it needed to develop an accurate cost model. As a result, Dukal's customer satisfaction levels have improved significantly. "Calls from our customers expediting orders have almost stopped," Grasso reports.