A study in success: Private label solutions
RRD’s customer, a major consumer electronics retailer wished to provide private-labeled and price differentiated products. They sought a partner to support the manufacturing and fulfillment of MP3 flash players and similar flashcards with aggressive price points that could compete against outside branded suppliers. The customer traditionally contracted vendors to deliver fully packaged products to its stores, foregoing any direct involvement in the manufacturing supply chain.
Given the complexity and high price volatility of flash-based products, the customer needed to implement a Just In Time (JIT) inventory and product conversion model. A streamlined supply chain was necessary to compete against branded suppliers.
The retailer’s major concerns were the ability to:
- Implement a highly competitive total-cost model resulting in increased margins
- Minimize inventories with a pay-by-consumption model and eliminating the capital requirements
- Select and negotiate with ODMs (Original Design Manufacturers) and component suppliers
- Assure rapid replenishment, enabling the highest product availability with the lowest inventories
- Recognize forecasting inaccuracy issues and gain complete visibility with a single point-of-control
- Compete on price in a commodity segment
- Achieve a highly flexible supply chain that could react to seasonal demand, volatile component pricing, dynamic customer demand and shorter product lifecycles
- Achieve lowest-in-category product returns
RRD’s private label solution enabled the customer to focus on product development, marketing, and product sales. In return, RRD assumed responsibility for the procurement, manufacturing, product configuration, packaging and retail distribution of the MP3 products.
This innovative private-label solution consisted of RRD managing commodity procurement and ODM management as well as global logistics. A major advantage was the ability to manufacture generic products in Asia and configure them on demand at RRD’s facilities close to the ultimate distribution points.
Shipping costs were lowered by not bringing finished, packaged products from Asia. This faster product-conversion cycle lowered overall inventory levels prevented costly stockouts. This solution lowered total costs, added responsiveness, flexibility and visibility to the supply chain and still maintained the customary finished goods purchasing model.
RRD's private label solution allowed the retailer to become more customer-centric by designing, differentiating and controlling the products look and feel based on the company’s market and customer knowledge.
The customer realized significant benefits, including:
- Better Price and highest in product category margins
- Low Inventory / high turns
- Same quality products as branded supplier (often produced by same manufacturers)
- Ability for retailers to have input to product features and design
- Retailer still gets one invoice from one supplier and buys only finished goods
- Differentiated products by region and country
- Increased responsiveness to highly volatile component supply and price elasticity