In the consumer packaged goods industry, order optimization is a key component of supply chain efficiency. A lack of it can be a source of supply chain disruptions meaning added costs for manufacturers and retailers alike. This operational inefficiency can create a ripple effect that could easily be avoided through proper analysis.
With the CPG customer, the demand and antiqued ordering systems had left the company’s retailers ordering product inefficiently, such as ordering less than a pallet load or less than a layer. The company manually case picked outbound orders, adding significant labor costs, increased risk of workplace accidents and injury, and unstable loads, leading to more product damage and transport costs.
The CPG company’s retailers experienced extra handling costs and poorly utilized pallets, which occupied valuable racking space in back rooms and warehouses. Because of the lack of order optimization, case picking ballooned to 20% of its total orders, adding up to $1 million in additional costs for the CPG.
To improve its processes, the customer collaborated with CHEP to help streamline the process and identify cost savings initiatives.
CHEP went on-site with the CPG company’s team, performing operational assessments at their production and distribution facilities to evaluate areas for cost reductions. Once we uncovered the inefficiencies in their customers’ ordering patterns, CHEP analyzed the data over several weeks utilizing our proprietary Order Optimization tool and began compiling recommendations on where to improve.
CHEP determined hundreds of products were being ordered at less than the recommended full pallet. To combat this ordering anomaly, we developed specific recommendations by SKU to change those patterns and provided collateral to educate the CPG company’s primary retailers on the benefits of each change.
In the initial review, CHEP identified about $36,000 in annual labor savings, and we expect the company to achieve upwards of $3 million in labor and product damage savings when it applies these changes to its entire retailer network.