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Where Brand Identity Meets Economies of Scale
By: Elizabeth Abrams
Posted: April 6, 2010, from the April 2010 issue of GCI Magazine.
page 3 of 4Also speak with expert logistics providers with knowledge of your product line, and ask them about increasing pack out. You’ll save on outer packaging and also cut back on transportation costs, getting increased density per pallet. Remember that becoming sustainable also has marketing benefits. Walmart, the world’s largest retailer, uses both its Sustainable Packaging Scorecard and its Sustainability Product Index as litmus tests between suppliers. Rating well enhances a brand’s relationship with its retailers and offers the chance to market as truly sustainable.
Logistics: Please the Wallet
Now that your product has a fresh face and a lightweight more compact design, it’s time to find a logistics provider to safely store and ship your goods. Logistics costs account for 6.9% of consumer product goods company sales. Of that, 38% is associated with outbound customer transportation, according to the Grocery Manufacturers Association. And relying on a shipping department to call around for the best quote is no way to efficiently ship or monitor your product. Consider outsourcing to a logistics provider with long-standing relationships with hundreds of carriers. Their large shipping volume will dictate a much more competitive rate.
Also look for someone with experience shipping similar products. Find a provider with a solid stock rotation program and a Web-based ordering and tracking system that keeps the brand in control of inventory. Freshness is critical with makeup, skin care and fragrance products, so a brand needs to be able to monitor its products’ best buy dates in real time. Retailers order quickly and stock smaller and smaller inventories, so providers must be able to cross dock and handle the occasional pick and pack order as well. And brand owner’s shouldn’t forget to ask whether they routinely keep strongly-scented items apart to prevent cross contamination.
Finally, brands also have an opportunity to cut transportation costs and keep rising fuel costs at bay. Small brands, too, can level the playing field between them and larger competitors by joining a retailer consolidation program such as those at logistics providers such as CaseStack, Hanson Logistics and Millard. As part of such a program, a brand’s product is combined with other products all requested by the retailer in a master purchase order. The brand’s would-be “less-than-truckload” (LTL) order is then shipped on a full truck, affording a cost savings. This also shortens delivery times, improves lead times and reduces potential damages. The resulting savings can be applied to shelf price, demonstrating to consumers that, as a brand owner, you believe in reducing excess and believe in passing the savings on to consumers.
Suppliers and manufacturers experience conservation in the form of reduced transportation costs and the brand no longer has to sacrifice service levels. “That old mantra of cutting quality or distribution for the sake of transportation costs is over,” says Dan Sanker, CEO, CaseStack. “When you join a consolidation program, the provider works directly with the retailers. [Transforming] LTLs into full trucks, for example, cuts costs by 20–40%. On-times increase 20% and millions of pounds of carbon emissions are taken out of the equation.”