We were engaged by a national stockist and distributor of imported reticulation and plumbing products used in high pressure industrial applications (e.g., mining and manufacturing). They’d been experiencing declining profitability over the preceding few years, due to increasing cost-to-serve ratios. We helped them optimise operations to improve overall profitability.
We faced a challenge where our client was importing products in bulk from low-cost manufacturers in Southeast Asia, with orders placed monthly and over 2,000 SKUs held in inventory. The highly fragmented customer base of maintenance sub-contractors and end-users led to a relatively low average sales order size; orders were estimated or based on a “max-min” re-order system. As a result, our data analysis revealed excessive warehouse labour hours in picking, packing and dispatching orders, indicating a need for optimisation in inventory management and supply chain operations.
We successfully implemented pre-packaging of goods, resulting in a 50% reduction in warehouse labour costs due to faster picking and packing times and a 90% decrease in cuts and scratches by handling packaging rather than goods. Despite a 2% increase in COGS due to additional packaging, the benefit of the significant reduction in warehouse labour more than outweighed the COGS increase. In addition, our client received positive feedback from the market, as customers appreciated the “ease of product handling” provided by the pre-packaging.
