GDS Return on Investment Tip #3:

Many people ask "What is the Return on Investment (ROI) for GDS"? I will create a series of areas to look for savings in order to help you calculate what your return may be. In 2004, the Global Commerce Initiative did a study with Cap Gemini, called Project Jury. For basic product data, the ROI for GDS was approximately for every 1 billion in sales would return 1 million in savings. From most of my studies and projects, this is an accurate number. This does not include processes like price sync, or some of the newer GDS capabilities. Link to Project Jury Study

Tip #3 Transportation Costs:
This is actual 2 step issue to drive the transportation costs down.

Old Process of New Item Introduction:
Step 1: Sales person sells a case of a new product the actual information shared with the retailer is a product specification and not actual measurements and weights
Step 2: Retailer creates inventory for stores and warehouse based upon this information
Step 3: Supplier begins making product. While producing product supplier has to make modifications to the package.
Step 4: These changes are never communicated back to the retailer
Step 5: Supplier most likely never even updates their internal system

What is the impact?
1) The supplier may have to re-measure all of the weights and pallet as the warehouse plan may not match.
2) On shipping out pallet and truck plan may not be optimized and underutilized truck space available.
3) The truck on the shipment route may be stopped or delayed due to overweight.
4) The retailer upon receipt may have to re-measure all of the weights and pallet as the warehouse plan may not match.
5) Then the retailer must re-enter the data into their system to receipt.

2 Process changes need to occur in order to achieve benefit
1) Data Accuracy program. When a product comes off the production line, weights and measurements should be updated in the suppliers internal system, or if they prefer to use a 3rd party to do this, the supplier still needs to update their systems. (if this is the only step completed, the retailer does not gain the benefit)
2) GDS - It is important for the retailer to understand the information the first receive is preliminary data. GDS by itself will only communicate the preliminary information. If the data accuracy program and GDS both are in place, once the data is update in supplier system and resent to retailer, then and only then do both parties gain benefits.

How do you measure?
1) Examine key skus and capture preliminary data and final data and determine amount changed.
2) Then determine based upon truck capacity the impact of the incorrect measurements have on truck utilization.
3) Some trading partners use truck tolerances to avoid over weight penalties and delays. These could be potentially removed.

In my studies I have seen a benefit of approximately 0.5% of total sales. So for 100 Million in sales, you could expect a return of 50,000 in reduced transportation costs.

Feel free to contact me if you would like to discuss,
Steve  srobba@sa2worldsync