Case Study: e-Commerce Beauty Product Retailer
Supply Chain Turnaround Project:
Our client, a high net worth investor, acquired an existing e-commerce beauty product business ($25M/year revenue) and hired us to review the existing supply chain processes and suggest improvements.
Procurement Contract/Currency Terms Negotiation:
The client sourced all of its product from a large Chinese vendor. Upon initial review of the contract, we found that the Minimum Order Quantity (MOQ) on each of the 20 different SKUs was very high. We renegotiated the contract to reduce the Minimum Order Quantity (MOQ) on each SKU by 50%. As a result, our client was able to save a significant amount of capital from being blocked in inventory.
The contract payment terms were in US Dollars and we renegotiated the contract in Chinese RMB. As the Chinese RMB has devalued 10% versus the US Dollar in the last year, the client was able to benefit from the US Dollar appreciation.
The retailer shipped all of its product by air leading to very high shipping costs. After evaluating the product demand and lead times, we suggested reallocation of freight between air and ocean modes. Utilizing our analysis, the client split shipments between air (25%) and ocean (75%), leading to significant savings on freight costs.
We sent out a number of RFQs to different ocean and air freight forwarding companies to negotiate the best rates for the business. We selected a new carrier and the client’s monthly freight expenditure reduced by $60,000.
Risk management was a concept that that our client never thought of. While this approach had worked so fa, it was a recipe for disaster. The client had no cargo insurance on any of the products. We connected the client with different insurance underwriters and the client was able to obtain “worldwide, blanket cargo” insurance that covered product both in transit and in storage at the warehouse.
In addition, the 3PL warehouse contract had no provision which held the warehouse accountable for any willful loss. We introduced “shrinkage” and “negligence” clauses on the warehouse contract to hold them accountable for loss and theft.
Benefits to Client:
By working with us, the client was able to optimize its supply chain processes and costs. Due to careful contract negotiation, we were able to significantly reduce procurement, logistics costs and also mitigate the supply chain risk.