Decrease Your Supply Chain Costs

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Henrik Müller Hansen

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Decrease Your Supply Chain Costs

Supply Chain
Management

A supply chain constitutes a set of activities ranging from production and manufacturing, to logistics, warehousing, transportation, and final delivery of goods to the customer (Handfield RB, Nichols EL. Introduction to supply chain management. Upper Saddle River, NJ:Prentice-Hall, 1999). For well established retail companies such as Procter & Gamble and Wal-Mart the supply chain is meticulously evaluated and analysed. For a start-up company finding the time necessary to evaluate the supply chain is very very hard. We will however show you that it's very worthwhile.

We will focus on the logistics, transportation, and final delivery of goods to the customer - rethinking these parts of the supply chain can significantly improve your bottom-line result. From the start of our operations Optimalprint has completely changed how we work with logistics, transportation, and final delivery of goods to the customer, decreasing logistic and distribution costs with 60 to 80%! Some of these cost saving actions are non-theoretical and "easy wins" while some requires a lot more work.

This blog-post is written to get your started with rethinking every part of the shipment / distribution process of your goods and services.

Logistics - Input factors in Optimalprint's packaging process

Optimalprint has used a cardboard box which cost has varied depending on size from $ 0,35 - $ 0,60. Optimalprint is now testing a semi-automatic packaging machine that thanks to corrugated board, purchased on a reel, will decrease cardboard cost per parcel to approximately $ 0,10-0,20. Thanks to the reel support, this packaging machine can adapt the parcel size with the actual size of the product. How this machine will work in the daily operations is to early to tell but we are now finally in the test-phase, a big step forward for a start-up.
Packaging has been human capital intensive for us. We have spent on average 60-90 seconds per parcel with this semi-automatic packaging machine we will decrease this time with appr. 50%, close to 30 seconds. Investing in a machine however, requires some economies of scale .
Making order and customer information very visual for the people involved in the actual packaging of your products. We have placed computer screens next to the packaging process that clearly displays to the person packaging - Order ID, Picture of the product, Name of the customer, Address to the customer and matching products (if the customer has ordered other products from us that can be put in the same parcel).
Adding a barcode system that is linked to our order and customer service system. We have developed this system ourselves and basically only paid for the hours used and a barcode scanner for a total cost of $ 120! Before we had to manually check the order as "sent" in an excel-sheet and in addition match the products visually with the original order. We estimate that our barcode system reduces time spent in our order system with 99%! Before we spent 90 seconds and with the barcode system we are down to 5 seconds for each individual order. This barcode system is also a requirement for further automation in the post-printing process.

Transportation and Final Delivery

We used to send all parcels produced in a country with the incumbents post service to the various destinations within Europe. With growing order volumes, arbitrage opportunities have arised within the European post systems. Depending on where the customer's order is printed and where the customer wants us to ship his or her parcel we are now able to add another distribution solution that also involves DHL or UPS. We ship in bulk - overnight - to a EU-country that supports the most cost efficient distribution to a certain bulk of our customer orders. Besides the direct cost savings, we can also shorten distribution time to the destination country that DHL or UPS send the bulk of products to.
We are now investigating if we can send, via UPS or DHL, to a EU-country but let yet another country's post system handle the distribution. An example - If we print in Denmark, ship over night via DHL or UPS to Sweden but instead of letting Posten distribute from Sweden to the rest of EU, we let the Swiss Post deliver from Sweden to a certain destination such as for example the UK. Such a distribution system now indicates a cost reduction of roughly 20%.
When the customers register we have started offering registration of the customer's cell phone number. The advantage for the customer that have orders that are so big that they must be sent to the local post office the cell phone number gives us the opportunity to communicate with the customer via SMS. This increases customer satisfaction as well as lowering our customer service costs since some customers call us to find out about the status of their order.

Supply Chain Management is an area under continues development. One of the most prestigious universities within Supply Chain Management is MIT through it's Centre for Transport and Logistics. Feel free to digg in