It is known that one of the purposes of trade is to buy one item at the lowest possible price and then sell it at the highest possible price. This is simple and obvious. The same applies to all other activities of the company. Any less costly activity can increase the Company's profitability by reducing input costs
. But if the body is large or when people are not aligned, then the "Silo" thinking syndrome occurs. Silo thinking is typical of larger organizations, but it can appear in every organization. Silo or functional thinking seems functional, efficient or cost-effective, but it is totally contrary to the common good of the whole organization. Example 1:
Beverage Company imports sugar with greater volume and delivery dynamics than usual. As is known, sugar is one of the main ingredients of soft drinks. The annual quantity of sugar ordered is 12% higher than the planned annual production. The quarterly dynamics of production and transport dynamics is as follows:
In sugar production:
Q1-14% Q2-26% Q3-33% Q4-27%
Q1-16% Q2- 33% Q3-32% Q4-19%
Sugar is bought on this volume and delivery dynamics as the price was more preferred to this quantity. In addition, sugar is more expensive on the stock market in Q3 than in Q1 and Q2. So the plan is obviously okay.
But in this situation there is the sugar surplus stored in the warehouse. The standard storage space for sugar is 1000 tonnes. With the new setting, the company has a quarterly average stock as shown:
Sugar in the warehouse (mt):
Q1-1.050 Q2-1.850 Q3-1.550 Q4-1.250
It is obvious that the Company needs extra warehouse renting the excess sugar, which caused extra costs. In fact, this situation shows what is the deferral of the usual cost to the Silo-Thinking-oriented company. Fortunately, saving sugar is quite enough to cover the extra storage space. Sugar savings amounted to EUR 80 per tonne, while the warehouse and the extra cost were EUR 12 per tonne. Thus, the final savings per kilogram of sugar were not EUR 80 instead of EUR 68
In this case, the company still collected more money than before, even though there were a large number of internal conflicts between the various departments have to pay the storage cost. If the supply chain pays extra storage costs or purchases low-priced sugar
Another Soft Drink Company is analyzing the different possibilities of cost savings to make your decision to be thinner (and cheaper). The pallet of the product consists of a number of cases placed on a wooden box. Of course, the company, which sells millions of copies a year, decides to use a 45nm film with a pallet cheaper than the 65nm film. This was originally a perfect example of smart savings.
Unfortunately, the problems of storage soon appeared. Pallets in the warehouse are placed on the other. There are other methods (racks), but this method is the cheapest since it does not require investment. Generally pallets are stored in 3 layers. But with this weakened foil the pallets lost stability. This was reflected by the sporadic collapse of the lowest pallets. This has been a problem in several aspects: security, costs (400 EUR / palette), customer satisfaction, … Only then two pallets were stored. After this situation was solved, there was no more pallet collapse.
But on the other side, the problem appeared. As the season approaches, the warehouse was quickly loaded, as the capacity was reduced by the decision to place the pallets in 2 places on 3 layers. The solution was to rent a seasonal warehouse. Finally, someone asked what caused this problem in the first place.
Really what was the reason? This was the new covering film that changed the procedure for storing pallets. And what was the result?
– New Wrap Film Savings With EUR1.2 Pallet
– For Pallets per Stock of EUR 3 Pallets
So, finally, the price of a new pallet, The company lost money by introducing cost cuts in production because it increased storage costs. The EUR1 savings caused an additional EUR 3 for postponing the costs. The solution used Wrap foil for products whose stability on the pallet was endangered by the thinner film.
Source by sbobet