DHL saved on packaging going direct to manufacturers

posted by Francis Churchill
11 October 2018

Talking directly to packaging manufacturers has helped DHL reduce its cardboard cost.

Andrew Yeaman, director of managed procurement services at DHL, said understanding how the firm’s packaging was made allowed it to adapt its specifications to make production more efficient.

Speaking at the eWorld Procurement and Supply conference in London, Yeaman said it was normal when buying indirects, including packaging, to go through agents, distributors or warehouses. “There’s lots of costs within that. And on indirects, if you’re outsourcing by category on a traditional tender approach, those tenders tend to drive closed-book fixed costs,” he said.

Instead of going through distribution, DHL decided to speak to the manufacturers directly to understand how cardboard cartons could be “manufactured in the most efficient way possible”. “We’ve changed our carton dimensions very slightly, in some cases only by millimeters, which means when we’re producing our boxes they’re coming off the line in the most economic way possible.

“Just small things like this is where we think we can deliver value on indirects,” said Yeaman.

Also important is considering the end-to-end costs of indirects. In the case of packaging, Yeaman said DHL wasn’t always capitalising on the waste cardboard it was generating. “We weren’t joined up in our thinking and we weren’t negotiating to re-sell our own packaging waste to the people who make our cardboard,” he said.

By developing an end-to-end online system for purchasing packaging, Yeaman said DHL made “significant savings” for itself and some of its e-commerce partners.

Yeaman said many firms he worked with still considered indirect spend as something to be handled regionally, but modern e-commerce technology created a “really good opportunity to look at things globally and not necessarily in isolation”.

Even at DHL warehouses, Yeaman said there were large regional variations on the levels of indirect spend for otherwise similar facilities.  “We’ve got the same sheds 40 miles apart where one was spending 25% more on uniform and another was spending 30% more on packaging.

“There may be a really good reason for that, but that’s useful data to go and talk to people and find out what’s going on,” he said.

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