More Metrics
Read the entire series of articles based on the 2005 MHM Census of Distribution:

From the executive suite to the shop floor, the phrase "world-class" has been repeated so many times that the word itself no longer has much meaning. Still, most material handling, distribution and logistics managers will recognize a world-class facility when they see it. Such operations combine technology and equipment with effective processes and skilled people to achieve a superior performance in their sectors.

For the Census of Distribution, Material Handling Management magazine asked survey respondents for a subjective assessment of how close they thought their facilities were to peak performance, whether they had made "no progress," "some progress," "significant progress" or had achieved "world-class" status. Of the 457 responses that we received, 3 out of 10 (29%) said they had made significant progress or were worldclass. This report compares the management practices and performance metrics of these leading facilities to those where managers said they had made no progress or only some progress toward world-class performance.

Facilities that managers rated as world-class were more likely to be part of a public company and not privately owned. Wholesalers were most likely to rate their operations highly, followed by third-party logistics providers and manufacturers, ahead of distributors and retailers. Whether the building was owned or leased made no difference to world-class performance, but the age of the facility did. Surprisingly, because newer facilities tend to have newer technology and equipment, managers of facilities under current ownership for more than 10 years were more likely to rate their operations as world-class.


World-Class Operations Implement
More Management Practices
More than 80% of the facilities where site managers reported that they had made significant progress or were world-class have continuous improvement programs. Less than half of facilities where they had made no progress toward world-class performance had such a program. The same pattern follows for benchmarking, lean, quality certifications and other management practices.

No progress

Some progress

Significant progress or world-class

All Facilities

None of these

37%

17%

8%

19%

Total productive maintenance

8%

14%

22%

15%

Six Sigma

2%

15%

25%

16%

Open-book/sharing financials

11%

21%

26%

19%

Energy management

20%

14%

27%

19%

Quality certifications (e.g. ISO)

11%

23%

36%

25%

Lean/lean material management

19%

30%

42%

31%

Benchmarking

22%

39%

48%

39%

Continuous-improvement program

42%

61%

81%

63%


Source: Material Handling Management's 2005 Census of Distribution. Research Conducted in partnership with The MPI Group (Cleveland) and Industry Insights (Columbus, Ohio), two industry and market research firms.

The Best vs. the Rest: World-Class Performance Defined
Facilities where site managers reported that they had made significant progress or had achieved world-class performance reported an average on-time delivery rate of 96.4%. This compares to lower on-time delivery rates at facilities that had made some progress (93.3%) or no progress (88.5%) toward world-class performance. World-class facilities reported superior order-fulfillment metrics in most other categories. The exceptions were storage utilization, order fill rates and inventory turns. Warehousing costs as a percent of shipment value were almost five points lower at world-class operations.
Mean

Order cycle time
(order release to ship time) hours:

No progress
Some progress
Significant progress or world-class

28.6
27.6
20.2

Customer delivery lead time
(receipt of order to delivery) days:
No progress
Some progress
Significant progress or world-class
12.9
13.4
7.1

Order fill rate
(orders filled complete / total orders) %:

No progress
Some progress
Significant progress or world-class
94.8
93.6
94.6

Order accuracy
(error-free orders / total orders) %:

No progress
Some progress
Significant progress or world-class
95.8
95.9
97.6

Line accuracy
(error-free lines / total line shipped) %:

No progress
Some progress
Significant progress or world-class
95.1
95.9
98.0

On-time delivery rate
(orders delivered on time/total orders)%:

No progress
Some progress
Significant progress or world-class
88.5
93.3
96.4

Perfect order rate
(perfect deliveries / total deliveries) %:

No progress
Some progress
Significant progress or world-class
88.2
92.1
95.2
Annual storage utilization (occupied capacity / total storage capacity) %: No progress
Some progress
Significant progress or world-class
78.0
76.8
78.4
Total inventory turn rate (Annual dollar-volume shipments / average on-hand inventory) turns: No progress
Some progress
Significant progress or world-class
14.4
9.4
13.3
Warehousing costs as a percentage of shipment value [(labor + overhead) / shipment dollar volume] No progress
Some progress
Significant progress or world-class
15.6
12.0
10.7

Source: Material Handling Management's

2005 Census of Distribution. Research Conducted in partnership with The MPI Group (Cleveland) and Industry Insights (Columbus, Ohio), two industry and market research firms.