Think Globally - Act Locally! Can Domestic Packaging and Distribution Offer Greater Benefits than Overseas Production?
News
Release
For Immediate Release
Contact: Bill Jacobson 510-651-5100 x208
It seems in recent years that there has been a 'Virtual Gold Rush' as more and more companies opt to move product manufacturing and service jobs offshore in pursuit of lower costs and improved profits. But are the perceived benefits real? Are managers now making such decisions based upon past popular trends? Or is something being lost in translation?
While there can be no doubt that materials and labor costs in China and the rest of Asia are lower than in the U.S., there is also no doubt that ocean bound shipments are slow and often delayed, air shipments are obscenely expensive, packaging flexibility options diminish and time-to-market issues expand.
Add to those concerns the recent decision by the Chinese government to raise the value of the Yuan by 2% and to peg it to a more flexible basket of yet undetermined currencies, one can see an even greater debate ensue when managers face future offshore manufacturing and packaging decisions. That the Yuan will continue to appreciate in value in the months and years to come, we think, is inevitable.
Recently DCL engaged with a prominent networking hardware company with exclusively offshore manufacturing and packaging. Faced with high freight costs, an inventory imbalance, an inability to respond quickly to the retail channel and missed market opportunities, the company was looking to improve profit performance and customer satisfaction.
Packaging and distributing in the U.S. can provide many of the improvements that company seeks. Key benefits include lower freight costs, reduced finished goods inventories with greater turns, faster responses to requests from the retail channel for packaging changes and promotional packaging, and an overall reduced time-to-market for products with the latest versions of software or documentation included.
Let's revisit that networking company. By opting to contract with DCL, a domestic supply chain management company capable of integrated packaging, assembly and distribution services, the company can bulk ship only the hardware of their products and have the rest of the package completed in the U.S. DCL can manage document preparation, allowing for the latest revisions to be printed while the hardware is still in transit. The same would hold for software or firmware. Again, while the hardware is still in transit, the latest software versions can be tested, and subsequently installed or copied on to CDs for installation by the consumer. There is an immediate impact upon customer satisfaction. Concurrently, while the product is still in transit, product marketers could continue to add value to the retail packaging image.
The company could begin lowering landed costs by shipping core hardware products in bulk, reducing container volumes. If speed is of the essence and air freight is key to timely market delivery, again bulk shipping only the hardware component would reduce air freight charges and offer significant savings over shipping completely finished packaged goods. Many times 80% of what goes into a consumer electronics package is air. The savings realized are significant!
Once the hardware hits the dock of the domestic packaging partner, packaging could begin nearly immediately. Order quantities can be adjusted to meet demands, specialized retail packaging configurations can be met, last minute orders from retailers can be filled and time-to-market can be reduced as most orders can be fulfilled in as little as 24 to 48 hours after the hardware hits the receiving dock.
Finished goods inventories are reduced as the domestic solution allows more of a "just-in-time" approach to channel demand. Reworks are nearly eliminated as product packaging is postponed to the last possible hour. This alone could be a significant cost savings but by reducing the number of times a product is touched from the bulk hardware stage to the finished good is another means of reducing overall cost.
At DCL we understand that printing, media replication, and assembly labor costs may appear cheaper overseas. However, when an in-depth analysis is done across all stakeholders, including the channel partners and the consumers, we believe domestic packaging and fulfillment is the most effective and potentially the most total cost reducing / customer satisfying strategy available.
With proper planning and execution costs are reduced, revenues are increased, channel partners are happy, and consumers are satisfied.
About
DCL:
DCL is a focused supply chain, assembly, packaging and fulfillment
solutions company. ISO 9000-2002 certified, we are fully EDI capable, RFID ready
and ERP / MRP enabled. We offer our customers web enabled 24/7 visibility into
our system via our "eFactory" tool and extensive IT capability
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