Logistics in the Manufacturing Industry: How Smaller Plants Can Benefit

Walk into the manufacturing sites of many large companies and you’ll observe a finely tuned inbound logistics operation, with parts and raw materials arriving at the factory for that day’s production requirements.

Often, third party logistics providers (3PLs) are key operating partners behind these manufacturing logistics solutions, providing the warehouses, trucks, systems and know-how to make this just-in-time (JIT) process happen. But small and mid-sized plants haven’t necessarily adopted the manufacturing logistics strategies large plants use to drive productivity and cost savings. That’s a missed opportunity.

Here are some of the ways that 3PLs can help smaller plants take advantage of logistics services in the manufacturing industry.

JIT: Free up space to increase plant throughput

Large manufacturing plants tend to maximize available floor space for production, choosing to store raw materials, parts, and packaging supplies outside the factory at a nearby 3PL-operated warehouse. Smaller plants have even more incentive to free up factory floor space given the space constraints. If faced with the need to increase production, consider outsourcing storage and JIT delivery of materials to a 3PL to avoid costly building expansion or relocation.

With JIT delivery, your products are stored offsite at your 3PL partner’s warehouse until you need them. The “until you need them” part can be determined by demand signals or a pre-determined schedule between you and your 3PL. The JIT method can be used for a wide variety of products – from nuts and bolts to kits that are assembled by your 3PL and delivered as needed.

The greatest benefit of a JIT supply of raw materials is that your on-hand inventory is substantially reduced, which frees up more space for money-making production. Outsourcing to a 3PL also frees up associates to work on key projects instead of mundane tasks like unboxing components and throwing out trash. It also reduces your spend as space and labor costs at a 3PL warehouse are typically lower than those at a manufacturing plant.

Check out this case study on our manufacturing logistics support for an aerospace company.

Parts procurement and VMI services offer further efficiency

Now that you understand the benefits of a JIT delivery method in freeing up space, labor and costs, let’s talk about some of the products that may utilize the JIT model. In your plant, you have key, strategic components which require a lot of your attention. But you also purchase non-strategic consumable parts like boxes, nuts, and bolts. These components are essential to your operations, but the management of those products (e.g., pricing and negotiation, ordering and replenishment, inventory management) is not.

Your 3PL partner can handle the procurement and management of these components on your behalf. The way parts procurement works is as follows: the 3PL orders the consumable parts on your behalf, stores them, manages the inventory, delivers via JIT and invoices you only for the parts you need, as you need them.

The inventory management part of this process is referred to as vendor managed inventory (VMI). With VMI, the supplier of the materials retains ownership of the inventory until it is delivered to you. Your 3PL can facilitate this arrangement by storing and delivering the materials, while giving the supplier secure visibility into inventory to manage product levels.

There are many benefits to entrusting parts procurement and VMI to your 3PL partner. For starters, you keep your money longer. You also free up floor space as your 3PL handles storage of these non-strategic items. And, you may pay less for supplies if your 3PL handles purchasing and procurement for several companies and receives volume discounts.

Turn to a 3PL for manufacturing logistics support

Some plant managers are simply more comfortable having raw materials on site. But today’s visibility tools allow a real-time view of inventory, whether on site, in the 3PL warehouse or in-transit. You don’t have to physically see the inventory to know it’s there. By partnering with a 3PL that specializes in logistics within the manufacturing industry, you can enjoy the efficiencies that come with outsourcing while ensuring that the operations runs just as smoothly as if you managed them yourself.

Based in Eastern North Carolina, Kanban Logistics is a true manufacturing logistics specialist. We offer inbound warehousing across our 1 million+ square feet of facility space, along with efficiency-driving services like VMI, parts procurement, JIT delivery and kitting. To learn more about how we can optimize your plant’s operations, contact us today.