Supply Today’s case study details steps to save a troubled third-party warehousing contract
Supply Today has released a case study that explains how an ailing warehousing contract can be resurrected with a little time. The full text of the study can be found in its website.
The study focused on a fast-moving consumer goods manufacturer that had been experiencing major problems with its third-party warehousing provider and was intending to breach the contract after just six months.
The company was not alone – frustrations with such contracts are common among both clients and warehouse providers.
Clients often complain of high costs, poor customer service and a basic lack of understanding. Providers are fed up with clients that have near impossible expectations but provide poor or insufficient information.
“The real life situation with outsourcing is that both sides of the relationship can be correct at the same time, making for difficult emotive conversations,” said John Hogg, Managing Director of Supply Today. “But hard data and clear heads can work through the issues.”
In the case study, Supply Today detailed the problems as reported by the client:
- Poor communication and slow response from the Third Party Warehouse
- Credits had exploded for over and under-shipments
- Inventory was inaccurate
- Order shipment delays
However, the third-party warehouse countered with the following Key Performance Indicators:
- Emails responded to within two hours at 99%
- Warehouse related credits at 0.03%
- Inventory at 99.9% at the bin level
- Orders picked on time at 100%
Two different viewpoints – one set of data
Over a two-month period, Supply Today reviewed and reconciled all data with the customer’s ERP system and with the warehouse’s management system. The analysis revealed that most of the problems arose from miscommunication or process flaws. For instance, the client found e-mails and reports from the provider to be confusing.
As for the credit issue, further investigation by Supply Today uncovered a process flaw - the lack of a return interface. This, coupled with human intervention and time pressures, forced hasty confirmations that led to an increase in paperwork credits.
Supply Today then worked with the parties to implement solutions. Weekly review meetings and a centralised online helpdesk improved communications, while daily credit reconciliations allowed each order to be reviewed and the cause of the problem to be fixed if necessary.
The review covered both the client’s and warehouse’s systems and identified a gap in the process. By working together and using the facts, the parties were able to identify and correct the problems.
“In most cases, it is possible to save your third-party warehousing contract,” John Hogg said. “Even when you’re so stressed that you feel nothing can be done, there usually is a resolution. It just takes open communication, willingness and a focus on the facts”.
8-Aug-2008