Shipment Consolidation at Far East Origin

Sector: FMCG – Major International Retailer of Consumer Electronics

Executive Summary

To support our clients strategy to raise purchase orders at Customer demand driven quantities, rather than Vendors own minimum order quantities, and to improve stock turns and inventory levels of direct sourced product a cost effective alternative to FCL (Full Container Load) shipments was urgently needed.

The need was also driven by our clients retail operations across mainland Europe, where the demand from each market varied vastly, and FCL quantities could not be supported, for highly profitable product, without increasing stock holding to excessive weeks in cover.

Client Challenge

To change internal best practice & mindset of buying direct sourced product at FCL level.

Implement a robust cost effective LCL (Less than Container Load) shipment method, without compromising service level, but adding a complimentary shipment routine, increasing operational capability.

Our Solution

A dedicated twice weekly consolidation service from north & south China, to each of our clients operating countries, was introduced. Minimum thresholds, in cubic metres per container, 20’ & 40’, were set, by destination. This allowed cost control decisions to be made pre shipment.

This meant shipments with under utilised containers but carrying high priority product could still be shipped, but only against the prevailing commercial reasons. Any low demand product could then be held back and added to the next shipment cycle.

Outcomes

• Products ordered in line with Customer demand and not Vendors MOQ’s (minimum order quantities)
• Increased frequency of orders placed on Vendors
• Product ranges increased by supplying low volume markets, EU wide, but resulting in higher profit margins
• Saving of USD 250,000 in freight cost in first four months of start-up, increasing consolidation volume to 5% of total teu
• Leveraged capability to switch from air freighted shipments lower cost sea freight options, further savings on a ratio of five to one per shipment
• Savings in landed cost, per product, when compared to the same product shipped as an FCL shipment