As mega-retailers grow through new stores and outlets, with investments in e-commerce marketing and sales and through the acquisition of smaller competitors, many consumer packaged goods (CPG) suppliers face margin pressure in helping these customers evolve. They are working to strike a balance between customer support and logistics costs.
Beiersdorf, a $7 billion CPG manufacturer, has reconfigured its facility floor plan, installed a new material handling system, utilized state-of-the-art software and other technology and instituted process improvements to grow with their retailer customers. In doing so, this manufacturer of skin and beauty care products (such as Nivea, Eucerin and Aquaphor) is able to focus on customer service requirements while identifying new opportunities to reduce their own operating costs.
Managing this balance successfully has resulted in its recognition as “Supplier of the Year” by Walmart and “Partner of the Year” by Target.
One of the more recent retailer requirements Beiersdorf has been dealing with is reducing carrying costs and improving their ability to react to variability in marketplace demand. The lower the inventory level, the less likely products will become obsolete as consumers’ tastes evolve.
At the same time, retailer orders to CPG suppliers such as Beiersdorf have become much smaller and more frequent to enable rapid response to the market. Distribution center (DC) managers realize that smaller, more frequent orders can drive most of the metrics by which DC performance is managed in the wrong direction (i.e., higher handling cost per unit, higher distribution costs as a percent of sales, etc.).
Beiersdorf is no exception to the challenge of order profile changes that could have an unfavorable performance impact. Its Cincinnati-based distribution team is focused on minimizing this impact on costs and more importantly, implementing material handling system enhancements to increase the flexibility of the DC to support its retail customer base with exceptional order quality and shipping performance.
To accomplish this, Beiersdorf worked with long-time consulting engineering partner, FORTE, to identify the following key goals:
- Upgrade and relocate the pallet stretch wrapper to increase queuing capacity for inbound and outbound pallets and to open up additional dock space;
- Expand the parcel consolidation area to efficiently handle the increase in small orders;
- Upgrade the reporting metrics and workload monitoring capabilities of its warehouse control system (utilizing FORTE’s Automation Director) and provide access of key metrics to employees as part of a continuous improvement process.