Consumer Healthcare Company Saves Overall and Individually

Challenge:

In an effort to reduce the impact of the 2008 and 2009 recession, a leading consumer healthcare company engaged OHL to reduce overall transportation costs and improve warehousing inefficiencies that were affecting cost per product. OHL implemented three initiatives that resulted in a 25% reduction in supply costs, and achieved a reduction in the overall cost per product by 15% year over year.

Total cost per product for this company includes labor, warehousing and transportation. Manual processes in each were negatively impacting labor and shipping costs, resulting in an inflated cost per product. OHL developed a plan to introduce labor management and transportation efficiencies and reduce costs across all three areas.

Solution:

To reduce labor costs, OHL introduced a Warehouse Management System (WMS), providing full radio frequency (RF) capability. Existing warehouse processes included a manual, paper heavy process including taping labels to boxes. The WMS installed by OHL created a real time, electronic scanning process for pick, pack and ship – reducing order processing time and reducing labor.

The OHL transportation engineers developed an optimized and integrated WMS/Transportation Management System (TMS) solution, replacing the existing in-house pool distribution transportation process. The exiting manual process was replaced with an electronic optimization tool that automatically holds shipments for the most cost effective shipping solutions.

Lastly, an Operational Excellence (OEX) program was also launched in the warehouse, focused on improving productivity per employee. Using OHL’s proven warehouse management processes, each employee is now measured for optimal operational performance. The results of this project allowed the company to eliminate overtime entirely and reduce supply costs like tape, ribbon, labels, cartons and paper by 25%.

Results:

In addition to the 25% reduction in supply costs, OHL reduced the labor required to operate production, reducing the cost per product by 15% between 2008 and 2010. The combination of these initiatives generated savings of almost 500k in 2009 and an additional 5% cost reduction annually.