SOLUTIONS FOR:
Procurement
TRUE COST OF BOXES ANALYSIS
Everybody loves the big box stores. The savings are real. But sometimes you don’t need a 1-year supply of shampoo.
The box business loves the customer who can buy in volume. But there is a massive difference between a 1-year supply of corrugated and a 1-year supply of your favorite shampoo. 18 bottles of shampoo take up about four square feet. A year’s supply of boxes takes up a lot more space.
At Tavens we analyze every box you use. We balance the usage, starting with EAU, but incorporating other demand drivers like promotions and seasonality, with the cost of production. It is true that larger production runs will yield a lower cost, but unless you can consume the larger quantities the cost of the warehousing quickly consumes the benefits of these larger orders.
Like you, we focus on your customers. Demand is the key. But there is more to the equation.
- The quantity per unit (skid required?)
- The size of the packaging (does it fit on a standard skid?)
- Units per production run (how many skids will we produce?)
- The storage topology of your facility (freestanding or racked?)
- The stack ability of the packaging (how high can we safely stack units?)
- Space requirement (how much space must be reserved?)
- Cost of space (what is the cost of the warehouse square footage without handling?)
- Stock draw-down (how long will each run last?)
- Demand Interval (how long from order signal to shipment?)
- Demand variability (maximum product can you ship and how fast?)
We use these and other parameters to derive optimum run quantities to determine a manufacturing cost and then we apply the other costs (primarily warehousing costs) but also carrying cost and other hidden costs associated with packaging obsolescence and loss to provide a real cost of packaging.
Spending dollars to save cents.
A survey of corrugated buyers and users report missed due dates, low OTIF (On-Time In-Full) ratings and a consistent problem with mis-manufactured boxes. They report that the number one problem they face is maintaining an adequate number of boxes to ensure operations is not impacted by a lack of corrugated packaging. This is especially true of customers who are engaged in end of line packing and the ecommerce segment where same day shipment is a critical customer value.
The second issue they cite as major problem is managing a wide array of SKU’s that consume a lot of warehouse space. The two problems are related.
As a buyer, not having a box is a high visibility failure. It shuts down production, delays order fulfillment and drives down customer satisfaction in a very public and tangible way. To prevent this very negative outcome, buyers have learned to rely on themselves. They are forced to build “safety stocks” of the corrugated packaging, which has a host of hidden costs, because they cannot rely on their vendor to make and keep commitments.
The corrugated industry loves this solution. It allows them pass along the costs of failure to their customers. Additionally, they get to run larger quantities, reduce shipment costs, eliminate storage costs and perform badly without any real-world impacts.
At Tavens we find it amazing that customers are willing to put up with this for a few percentage points off a product that is already very inexpensive.
We solve the problem differently.
How fast do you need boxes? How many do you need?
Ensuring you have the boxes you need when you need them requires collaboration and planning. There is no shortcut.
At Tavens we have developed proprietary systems and tools so our account managers, working closely with your team, ensures that you have that packaging you need when you need it.
When we on-board a new customer we take the time up front to evaluate every packaging SKU they use to develop the specific run quantity, safety stock and delivery intervals to optimize utilization and to determine the lowest possible cost.
We work with your team to establish standard order and delivery cycles that mirror your production and fulfillment processes.
We also created our unique Rapid Response system. This is a planned approach to prepare for the unexpected. Items that have high variability, or have complex elements are analyzed to provide a rapid response template so we can respond to the unexpected emergencies that will inevitably arise.
Finally, we conduct periodic account reviews to discuss upcoming changes in demand.
A defense in depth through planning and collaboration.
Because the only thing that matters about a box is getting the product inside to your customer.
PARTNERSHIP VS. VENDORSHIP
It’s never about the box.
Nobody wants to buy corrugated packaging. Boxes are needed, rarely wanted. But the truth is, if you need it, corrugated packaging touches almost every part of your business.
From your inbound logistics, material handling and warehouse operations teams to your product engineers and marketers to your operations and fulfillment teams to your procurement and inventory control groups. It’s a large, complicated, necessary problem that must be solved every single time you want to ship your products.
At Tavens, we don’t love boxes. We love what boxes do. We love helping our customers get their products to their customers...the way their customers want it.
Because boxes are cheap, expensive to own but crippling when you do not have them, we see ourselves as more than a vendor. We are a partner.
We work with every team in your organization from the product managers to the sales and marketing teams to the operations, warehouse and logistics folks and the procurement and planning teams.
We work with you to get your products to your customers.
