Packaging Cost Reduction for a leading Power Conductor manufacturer in India
Title: A blend of Design optimization, Reverse Logistics and packaging SKU standardization to deliver 14% savings on current packaging costs
Background:
- The client is a leading manufacturer of Power conductors and Optical Fibre Cables with turnover over Rs. 2500 Cr
- Wooden drums are used for packaging and supply of Conductor cables. Client was interested in exploring opportunities and alternatives for optimization of the (significant) outlay on packaging expenses
Pricing Gaps:
- Scarcity of good quality wood and monopoly of local vendors leading to a seller’s market.
- Establishing cost basis for negotiations was also challenging.
- Global procurement is not cost competitive
- Alternates packaging solutions in plastic and steel are not price competitive
Process Gaps:
- SKU selection (by client) was a time-intensive process taking upto 3-4 weeks. It also led to multiple SKUs of packaging being required.
- Absence of standardization of SKUs led to inefficiencies in planning and procurement as the team was unable to maintain inventory. Vendor manufacturing capacity could also not be reserved in advance.
- Tactical approach to procurement resulted in spot purchase-price negotiations
- Handling and usage of drums at client site rendered them unfit for reuse
Our Solution:
- Design optimization of the existing cable packaging – tweaking components, materials and sizes while conforming to IS, AS NZS, DIN and NEMA standards.
- Standardization of packaging SKUs ; product – SKU map developed after taking the conductor characteristics, manufacturing capacity and client requirement trends into account.
- Procurement optimization (local & global vendors) for reducing landed cost for key packaging raw materials (wood and steel components) and complete units in wood, steel and hybrid variants.
- Feasibility analysis of backward integration of packaging manufacturing operations - identified investment requirements, manufacturing partner and established supply lines.
- Reverse logistics for packaging – developing and tweaking an RL model for reuse of packaging units
Benefits:
- SKU Standardization delivers 8% savings on existing packaging costs. SKU selection process is altered, with the marketing team now making recommendations to their client and decision time is cut to few minutes from 4 weeks.
- Design optimization and validation to deliver 5-6% savings
- The Drum-as-a-Service model to deliver 30-40% savings in the long term on the current packaging costs. The environment friendly initiative is also an opportunity for the client to leverage towards corporate brand building.