New Product Procurement Supply Chain Helps Australian Retail Giant To Cut Costs & Add Value

New Product Procurement Supply Chain Helps Australian Retail Giant To Cut Costs & Add Value

One of Australia’s largest retail chains had a concept of reducing their operation cost to maintain the capital investment in new stores and staff. The retailer spent a massive amount of money on direct mail campaigns and targeted this as a potential cost saving.

With the help of MWG they have a platform now to save over $700,000 per annum- direct to their bottom line

 

Find out how: 

【Outline】

This large Australian retailer has over 55 stores with an annual turnover of over $70,000,000AUD. They use a mix of marketing methods to attract the consumer to their stores. Not dissimilar to all businesses they analyse the cost of the marketing as a percentage of their overall turnover and look to gain maximum benefit from the cost of each marketing tool.

The concept of the customer for the cost saving drive was very simple. Due to profit margins and gross margins on products being continually under pressure the business needed to work with the right business partners to save money. As new stores and the online business required large capital investment the retail chain needed to actively pursue areas of the business for cost savings that could return dollar for dollar income directly to the bottom line.

The customer outlined their cost saving drive strategy to MWG and subsequent meetings highlighted several areas to concentrate the focus for cost savings with the next 12 to 18 months delivering the customer a saving goal of over $3,000,000.

The first project the meeting identified for the customer was to reduce the cost of their printing of catalogue for direct mail campaign.

The direct mail campaigns involve over 65,000,000 catalogues distributed per annum at an operation cost of greater than $3,800,000 per annum. The direct mail campaign represented over 40% of their in total marketing expenditure. The choice to pursue and achieve cost saving in this area of the business was paramount to the strategy to reduce the operational costs in the marketing expenditure of the business.

Goal reduce the cost of the printing campaign by 20% or a dollar figure of close to $800,000AUD

The real number for the project were each month over 5,000,000 catalogues are deliver for distribution the current expenditure was forecasted at $3,800,000. The project was to deliver a nett percentage saving of approximately 20% for the bedding retailer.

【Customer Requirements】

  • Fixed pricing
  • Samples and proofs deliver prior to each print run
  • Same quality paper and print standard as their tender requirements
  • Delivery to warehouse ‘on time and intact’
  • Expected saving 20%
  • Start January 2014

The project is an excellent example of a partnership with set goals, set cost savings and set timelines. MWG were are to work efficiently and effectively as they provided with the full information for the project to succeed

All projects succeed when given the full information and working in a transparent partnership with the key stakeholders and decision makers of a business.

The involvement of MWG with the retail chain began with identifying the person who can make a decision that will critically change the face of the business.

The  goal of MWG was to fully understand the reasons for the decision of the retail chain and put forward a strategy and cost analysis that supported these decision and importantly the customer requirements.

Importantly, at each stage MWG were mindful of achieving the saving and partnering with manufacturers that displayed a strong social and environmental ethos in their business. MWG actively researched the market based upon the customer requirements; in particular the manufacturers must be accredited with the following organisations.

【MWG Strategy Process】

  • Ensure we fully understood the product and the supply chain
  • Research potential supply regions and manufacturers
  • Conduct due diligence with our Approved Manufacturing and Product Report (AMPR)
  • Test sample the print and paper quality of the manufacturers
  • Control the input cost price of the print paper through contracting the paper supplier to the manufacturer
  • Analyse the cost data
  • Eliminate suppliers and have a maximum of 3 core potential suppliers
  • Test actual print job
  • Supply sampling to customer
  • Manage the logistics and delivery  and exchange rate
  • Nominate successful manufacturer
  • Commence project

The MWG concept relied on ensuring that the manufacturer could perform the task, was in a location that was close to port and within a region that the MWG in country team could manage and finally control where possible key raw material costs and supply channel such as the print paper.

The region MWG chose was in Shenzhen in the south of China as it matched all the goals and strategies goals and processes needed to perform a successful project. The Shenzhen region in China has had a rich history of print manufacturing for all over the world. The background experience of MWG China team allowed them to focus on this region and analyse and conduct a full review of the operation and manufacturing ability of each potential supplier.

Importantly, without key information from the customer MWG cannot give effective results. This information must involve target price, volume, supply chain, product quality and general customer requirements.

【MWG Strategic Implementation】

The role of MWG is to be a bolt on business unit to the strategic planning of the customer. In the case of the retailer MWG needed to clearly understand the strategy being undertaken throughout the business. The strategy of the retailer was one of overall cost leadership. Simply meaning control and lower your costs to maintain margin especially for during expansion phrase.

Overall cost leadership. If you keep your costs lower than anyone else’s, you can sustain profits.

In short, it entails specifying the organizations objectives, developing policies and plans designed to achieve these objectives, and then allocating resources to implement the plans.

The resources the bedding retailer drew upon meant they chose to partner with MWG to perform the cost savings initiatives for the business. Each project over the next 12 to 18 months will have a clear outline and a target saving.

The implementation of the strategy carefully drafted a road map to continue the direct mail campaign by off shoring the printing to reduce the overall cost. The key mechanisms to the strategic implementation involved clearly analysing the situation and environmental factors of the project. Recognising the risks involved with logistics and on time delivery, minimising any currency shocks through economic volatility in the world, ensuring raw material supply and manufacturing competencies and involving on the ground quality control.

Task management of the project included the assigning of key MWG personnel to the project in the key areas in both countries. Activating a fluid communication channel between both businesses to endure clear reporting of any deviation from the road map that was drafted between MWG and the retailer.

【Conclusion】 How did MWG add value?

Anyone can search business such as Alibaba to find a supplier. Do you trust them enough to deliver substantial and consistent cost savings that will bring a positive result to your company?

For this retail chain to achieve the nett result of over $700,000 MWG invested time, energy, resources, used our intelligential property of connectivity and supply chain networks and managed a process our the ground in country.

The value MWG added to this business is not just the cost saving based on the dollar figure. MWG added exponentially to the value of the business as they could continue to use their own resources to run their business and let MWG focus on achieving the best result.

MWG understood the needs of the retailer through frank and clear discussion, delivered to them a plan to perform the project and executed the plan which will result in saving for the business.

The MWG China team took positive steps and actions that resulted in finding the best supplier for the project. The actions will always be greater and more beneficial than a person or people within a business that is situated away from the country the product is coming from.

If you have a printing job no matter how big or small you will save money

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New Product Procurement Supply Chain Helps Australian Retail Giant To Cut Costs & Add Value

New Product Procurement Supply Chain Helps Australian Retail Giant To Cut Costs & Add Value

New Product Procurement Supply Chain Helps Australian Retail Giant To Cut Costs & Add Value