Case – Consumer Electronics: CREATING A SUPPLY CHAIN THAT MEETS STRICT REQUIREMENTS WHILE CUTTING COSTS
Accelerating profitable growth with better supply chain management
Summary: What has been solved?
DHL Consulting helped a U.S. consumer electronics company revise its supply chain strategy and thereby achieve profitable growth.
Client
U.S. based global consumer electronics company
Task
Create a revised supply chain strategy to cut costs and meet strict customer demands
Results
The customer implemented the suggested course of action and achieved an estimated USD 10 million in savings
Team
The DHL Consulting team consisted of one Project Manager and 2 Consultants in collaboration with DHL’s Global Customer Manager and 2 DHL Supply Chain experts
Challenge: How to tackle the challenge of fast delivery at lower costs
As a result of aggressive market expansion combined with inherent market challenges, an international consumer electronics company suffered from low profitability and high supply chain expenditure in the U.S. Its main customers are major retail chains with strict delivery policies, which require orders to be received within 10 days. These demands forced the company to stockpile inventory at U.S. facilities. However, the forecast accuracy of this solution was quite low, and the company had trouble determining how much of which products to store in its various warehouses.
In addition to having a large inventory, the company relied heavily on fast, yet expensive transportation modes. This helped ensure products could be delivered within 10 days, but it ended up being very expensive. The challenge for DHL Consulting was to find ways to significantly reduce supply chain costs while still meeting market demands.
Team: Close cooperation – working hand in hand with the client
Deutsche Post DHL Group assembled an international team of three consultants and operational experts, and entrusted overall project management to DHL Consulting. Operational experts from DHL supported the establishment of specialized work teams to set the stage for efficient supply chain management.
This was a very high-profile project for the customer, who reviewed the progress in bi-weekly strategy sessions and coordinated with top management. Managers from marketing and sales, as well as finance and production, were also involved in the project, as it affected other areas, such as customer service and manufacturing.
Approach: Taking aim – defining the key priorities
The first challenge was to find the right focus. The team started by mapping out and prioritizing the cost drivers in the supply chain. To do this, a detailed, “as-is” supply chain model was prepared. Initially, the customer believed that reducing direct freight costs such as airfreight would generate savings. The as-is model, however, made it clear that indirect costs (such as inventory costs and the loss of value of products in warehouses) were just as important, and should also be made a key target for optimization.
In the next step, the team wanted to understand how other consumer electronics companies approach the issue. To do so, DHL Consulting conducted a benchmarking analysis and outlined typical supply chain models and best practices in the market.
Taking into consideration both internal and external perspectives, the team developed a list of ideas for improvement, which were tested in detailed scenario analyses. The results were condensed into strategies for supply chain optimization in each product category. Separate strategies were needed for each product category due to different product characteristics and logistical needs.
Results: Cashing in – combining the tactical with the strategic
The improvement measures proposed ranged from tactical recommendations such as leveraging free trade zones, to strategic changes in the supply chain, e.g. relocating a warehouse to a more suitable location, and increasing the production of certain products in Mexico.
The estimated impact of the improvements was a savings of over USD 10 million. Right after the project, the customer moved ahead with the implementation of the proposed initiatives, starting with the tactical opportunities.
Lessons Learned: Early stakeholder involvement – the key to defining the right focus
Supply chain optimization can be a major lever to boost a company’s profitability. The process, however, is very complex with multiple factors and interdependencies requiring a truly cross-functional approach. Involving marketing & sales as well as finance organizations early on is key when defining the right project focus and developing recommendations that benefit an organization as a whole.
Contact Us: Want to know more?
- alexander.schuett@dhl.com