Supply chain management in all industries is being asked to reduce costs and the expenditure involved in storing products is constantly under review. This week I read an interesting paper on reducing picking costs and on a number of non-putaway distribution models.

The most familiar non-putaway practice is cross docking. This distribution model has become a cost saving necessity for retail companies. Their inbound deliveries are taken directly from the receiving dock to the shipping area where they are immediately sent to stores or customers.

The paper goes on to describe other methods that can be used to minimize warehouse picking such as plant direct shipments, merge-in-transit and flow through. As supply chain managers debate where to reduce costs, consideration should be given to the implementation of one or more of these non-putaway processes.

Last month in China, Wal-Mart told a group of over a 1000 vendors and government officials of their plans for a more environmentally and socially responsible global supply chain. The company gave vendors a number of requirements, including timelines, that they will have to comply with if they want to continue to be a Wal-Mart vendor. These include compliance with China’s environmental laws and regulations and improved transparency of ownership, which includes each vendor to provide the name and location of every factory they use to make the products they sell. Wal-Mart will also require vendors to improve energy efficiency and consume fewer natural resources.

In addition to these requirements, Wal-Mart will require 100% defective-free merchandise from Chinese suppliers by 2012. American consumers have seen problems with products from China, including toys with lead paint and melamine-tainted milk. Wal-Mart hope to alleviate this issue in the next three years, thereby boosting consumer confidence, whilst reducing supply chain costs and improving their image as a world leader in environmentally responsible retailing.

Another company has announced issues with the implementation of their Enterprise Resource Planning (ERP) system. In a letter to its shareholders, Overstock.com reported problems with the implementation of Oracle’s ERP suite. The error caused them to overstate their earnings by $12.9 million. The company is now required to restate all their earnings records since 2003. Overstock stressed that the issues are not with the Oracle software, but with their own flawed financial procedures.

Overstock.com themselves point to the fact that the ERP system was “rushed” into production before the 2005 holiday season. Although the company does not indicate when or how the errors were discovered, it serves as a warning to companies currently working through an ERP implementation or upgrade to constantly review, test and retest all their procedures before going live.

Shipping decisions suddenly became easier this week as DHL announced the end of their domestic US parcel operations at the end of January 2009. Shipping departments across the nation were busy removing the DHL options from their transportation software and putting those DHL boxes and shipping forms out for recycling. After DHL’s purchase of Airborne Express in 2003 many companies looked to DHL as a viable option to the FedEx/UPS stalemate.

However after failing to win over and keep new business, DHL have always struggled. Earlier this year DHL had tried to reduce costs by outsourcing its air operations, but the slow down of the US economy came at the wrong time and DHL’s parent company, Deutsche Post, decided end the loss making operation. The demise of DHL means an end to the low price option and companies will no doubt find that their shipping costs in 2009 will increase.