When a Kentucky-based e-commerce business with over $1 billion U.S. in annual online retail approached us at PLS, they knew that they needed to find savings in their packaging and supply chain to drive greater efficiencies and reduce shipping costs but they didn’t know where to start.
Instead of going with a typical consultant who would suggest a one-size-fits-all approach to supply chain optimization, they worked in a strategic partnership with us to develop a customized solution to their specific packaging, labor, and shipping needs.
The result: over $1.97 million in annual cost reductions year-over-year.
Customized analysis of the e-commerce supply chain
To begin the process we worked closely with the e-commerce business to understand the flow of their operation through a mapping process that looks at everything from receiving and put up, picking, handling, packaging and shipping. We also analyzed their current pick and pack volume, labor metrics through acquired data and statistical sampling and engaged in discussions with their leadership on future aggressive revenue plans.
Through this process we identified several strategies to reduce labor and improve throughput in the operation. Based on their goals and the size of the impact to their bottom line we customized a phased-in process that would meet their needs.
As a first step, we worked with the company to set up a fully automated e-commerce packaging line that produced labor savings and reduced dimensional shipping costs through our OBI right-size packaging technology.
The result? Three key savings for e-commerce:
- We reduced shipping costs by roughly $870,000 annually — 84% of current dimensional charges
- We helped them replace 20 full time packers for an annual labor savings of $633,000
- We slashed their packaging spend an additional $185,000 annually thanks to right-sizing of their packaging and the reduction of void fill, corrugated and other waste
Beyond right-sizing and labor optimization
After analyzing their operations PLS also saw opportunities to improve picking efficiencies by ‘right sizing’ their piece pick operation from 63,000 ft2 to 37,000 ft2. We also introduced a new cart design for carrying products in the packaging area—changes that produced an annual labor savings of around $288,000.
The takeaway for e-commerce operations
There is no magic bullet when it comes to packaging optimization, labor optimization, etc. But partnering with an organization like PLS allows you to rapidly reduce costs through a variety of mechanisms.
We can help you identify the places where you are wasting time, resources and more with OBI. And unlike costly initiatives that other organizations might ask you to buy into, our model is to find savings and leave you with durable solutions that will make you lean and more profitable year-over-year.
John Moore – Founder
Packaging & Logistics Solutions (PLS)