Supply Chain Case Study: SAVINGS
Many factors can lead to transportation and distribution costs that are higher than need be. As an example, some companies will buy a two month supply of say corrugated boxes in an attempt to get the lowest cost per box as possible. Although their cost per piece may be slightly lower, they sacrifice both valuable warehouse space and precious cash in accomplishing this. In today's environment, both of these costs are too high for the limited benefit you get in exchange. IPC can help with this procurement issue but it does not stop there.
| Cost of Capital |
10-15% |
| Storage & Warehouse Space |
2-5% |
| Obsolescence & Shrinkage |
4-6% |
| Insurance |
1-5% |
| Material Handling |
1-2% |
| Taxes |
2-3% |
| Total Annual Inventory Carrying Costs |
20-36% |
Packaging design is also a major contributor to transportation and distribution costs. Often overlooked is that over time your packaging size and style needs change. By using the correct packaging size and style, lower cost in transportation and distribution can be achieved by better trailer utilization and reducing up charges by packaging delivery companies. IPC has the knowledge and ability to help recognize and offer solutions to issues that effect shipping cost.
Summary
A large distributor that ships by a packaging delivery company was using a number of different size boxes because they always have. As new products were introduced by the company the list of box sizes continued to grow. Not only did they end up with an unreasonable number of box size choices, they also ended up with a size that the freight company up charged them for using because of dim weight. This cost was negatively impacting their bottom line but was hidden in their overall shipping costs.
ipc Supply Chain Solutions:
IPC recognized this trend and took action. We worked with the customer to reduce the size of this questionable box by ½ inch in each direction therefore dropping the size below the maximum size that would trigger the dim weight fees without affecting the internal packaging. We were able to make this size reduction by altering the internal divider system slightly yet achieve the same results. This one change netted the customer a savings of $18,000 per year. We also, after conducting a profitability survey, reduced their total corrugated box size offering by 20%. This reduction in the number of box sizes meant they could buy more of the remaining sizes and earn more volume discounts. This also was less confusing to their packers as to what box they should use for what products. We now conduct inventory at this customer on a weekly basis, delivering only what they need when they need it.
ipc Results and Benefits Summary:
Because of IPC, this customer not only has improved their transportation cost situation but also reduced their corrugated spend, saving their distribution center money.
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