One of the areas where manufacturers and distributors can save untold levels of cost is packaging. One of my clients will save about a half-million dollars by reducing the size of its boxes by half. The current box was designed by their marketing department, and is much larger than necessary with costly photos and finishing.
This client has redesigned the box to still be very attractive, yet take up half the space. It will be packaged and mailed by the content supplier, so it doesn’t have to be received, put away, picked and shipped by my client. Because they can now put twice as many boxes on a pallet, shipping costs are much lower, and the boxes take up less room in the supplier’s warehouse. This simple change is saving about $500,000 per year.
What can we take away from this?
- When designing packaging, include representatives from marketing, purchasing, the warehouse and your suppliers.
- Smaller is better. Packaging can still be attractive and functional.
- Simplify the process – have suppliers do vendor-managed delivery if possible. The fewer times the product is touched, the cheaper it is.
For more on vendor managed inventory as a cost-saving approach, click here for a short video.
© 2014 – Rick Pay – All Rights Reserved
Supply chain risk could be lurking right inside your own company. For example, having too much inventory exposes your company to the risk of costly quality problems. If a quality problem is identified and you have a large quantity of that part, your exposure to high cost replacement could be extensive.
Design to Minimize Risk
Supply chain risk can be designed out of products through effective Design for Supply Chain Management (DSCM). Designers can use parts that are easily available, or for which there are suppliers in different geographic locations. Creating designs with supply chain risk in mind can help minimize exposure to supply chain interruptions.
Checking on Your Suppliers
Your finance department or banker can help identify supply chain risk in the form of supplier financial weakness. Suppliers can become financially stressed, affecting their viability and potentially causing interruptions to the supply chain.
Risks to the supply chain can be caused by much more than various types of natural disaster. Labor strikes can shut down plants or ports, equipment breakdowns can delay production and shipment, and accidents and mistakes can delay production and distribution of materials. Suppliers should be asked for risk management plans to help reduce exposure to supply chain risk.
© Rick Pay, 2013 – All rights reserved.
Many companies launch their lean journey by implementing the tools of lean, often starting with 5S workplace organization. But for sustainable results, companies need to begin at the beginning: selection and design of the products they plan to manufacture or distribute.
Eliminate the Waste, or Eliminate the Product?
Lean is all about eliminating waste, but sometimes we find ourselves working to eliminate waste in processes or products that should themselves be eliminated. Product selection and design are of primary importance, and if a product is unnecessary, why spend time reducing the waste associated with it?
When I help my clients improve their supply chains and reduce inventory, we start with two questions:
1) Are we carrying too many products that are duplicates or obsolete?
2) What can we do with product design to utilize common parts, reduce complexity or use lower cost raw materials?
Simplify, Reduce, Remove
The leading place to look for breakthrough lean results is the basic makeup of your product portfolio. Simplifying design, reducing the number of parts and removing extra steps in handling or production can reduce cost and inventory…quickly.
© 2013 – Rick Pay – All Rights Reserved.
As long as 2500 years ago, Sun Tsu wrote in The Art of War that speed is a crucial component of victory. In the 1980s and 90s the concept of concurrent engineering suggested that standardized parts and working closely with suppliers made for lower cost designs that could be brought to market more quickly.
A recent article in the Wall Street Journal describes how Toyota continues to improve it’s designs. It does this in an effort to speed decision-making, cut costs and appeal to car buyers worldwide. Toyota has found that they can cut costs while improving design to make their products even more attractive to the market.
In your efforts to be competitive consider speed, use of standardized parts, collaboration with suppliers and decision making at the level where work is produced to be vital for success.
© 2012 – Rick Pay – All Rights Reserved