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Supply Chain: Cutting Costs, Cutting Carbon

By: Sum-Sum Chan
Posted: January 9, 2009, from the January 2009 issue of GCI Magazine.

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Examine your future warehousing needs. Consider providers that offer a high level of item picking. Most drug/beauty stores and mass retailers will order lower numbers of multiple SKUs to be delivered directly to the store. The mixed box of SKUs will need to be handpicked by an efficient staff with experience in small item packaging. Warehouses utilizing finger- and wrist-scanners will be the most up-to-date with technology—often showing a faster picking rate.

Also, consider whether your product can be repackaged for seasonal sell or if it may need additional upgraded parts. Finding a provider with expertise in building and staging assembly will reduce outsourcing costs. The most effective teams are well-trained and can easily provide an accurate quote based on their average speed of labor. Those that can provide special handling and value-added services—kitting, ticketing, assembly, display building, etc.—will also allow you to work with multiple retailer-specific policies without missing a beat. This was especially essential for Rock and Republic’s launch of its Rock Cosmetics line to high-end retailers, including Bloomingdale’s and Harrods. The brand’s products required delicate handing by assembly staff wearing smudge-proof gloves for a blemish-free finish.

Programs to Enhance Your Business

Retailer-driven consolidation programs are the best ways for midsize to large businesses to enhance an already established supply chain. While other types of consolidation rely on timing and depend on outside orders, retailer-driven consolidation programs pool a group of manufacturers headed to the same retailer into one single purchase order, maximizing each truckload. By combining orders, the logistics provider can then deliver a full truckload headed to a single distribution center rather than shipping multiple LTLs, thereby reducing costs and delivery times. Retailer-driven consolidation, by-design, is a sustainable strategy—taking trucks off the road, lowering carbon emissions and eliminating wasteful practices such as partially empty trucks Advanced Beauty Systems (ABS), which manufactures a full line of beauty products, has opted for a logistics infrastructure that hinges on the cost and sustainability benefits of participating in a consolidation program. During the past year, its business has seen a surge in growth, and in 2008, responded to a demand from the European market. ABS is able to meet that demand by participating in a consolidation program with Wal-Mart that is especially accommodating to smaller-load, higher-frequency order practices and able to easily expand to higher-loads from order to order. This type of flexibility to order volume, as well as the allowance for shipping smaller orders, allows ABS’ growing enterprises to stay nimble. To meet additional growth, the provider has begun a program to deliver ABS product via container load aboard.

Additionally, by participating in the program, ABS has recognized cost savings of up to 34 cents per case (1 cent per unit). The program thrives on efficiencies, delivering reduced transit times as well as an increase in ‘must arrive by’ dates, and afforded a CO2 emissions reduction of more than 11 million pounds per year.

Savvy manufacturers and marketers may be well-dialed into the sustainability movement sweeping across industries. The next step for these companies is growing revenue by choosing sustainable solution providers that cut costs and allow ongoing growth.