Supply Chain Brain

Sony Ericsson Calls Up Cost-Saving
Packaging, Distribution Solution

hen a major cell phone manufacturer introduces a new product, more people sit up and look at the new offering than just consumers who’ve simply got to have the latest in telephonic fashion. There is quite a bit of interest back up the supply chain as well. There are the suppliers of the new handset, and then there is the 3PL tasked with transportation and possibly a host of other logistics services.

Packaging is one of those issues, and it was a primary concern for both Sony Ericsson and ATC Logistics & Electronics, when the former began making a new phone in 2006 for a major wireless carrier.

The traditional model called for Sony Ericsson’s suppliers in Asia to manufacture handsets, then ship them by air to the U.S. for distribution. That was no longer feasible with the introduction of a new model that was to be sealed in a clamshell-design plastic package rather than the more familiar rectangular box. The new design would affect size and weight of the shipments and the number of units that could be packed in a given carton or container. Clearly, an alternative had to be found because you couldn’t tell one of your biggest and most profitable customers sorry, can’t be done.

Principals at Sony Ericsson and ATC Logistics & Electronics, a Fort Worth-based 3PL, already knew each other. The latter specializes in serving the wireless, broadband, electronics, medical, industrial and automotive industries, and it had provided some services to Sony Ericsson in the past. Moreover, they each shared the same carrier as a customer. So even though Sony Ericsson looked at some other providers, it was felt that ATCLE would be the best to help with the packaging solution, says Fernando Correal, Sony Ericsson’s director of supply chain management for the Americas.

The answer was to postpone final manufacturing touches and packaging of the

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handsets until they arrived at ATCLE’s distribution center in Texas, from which they were shipped either to the carrier’s stores or directly to end users.

From Sony Ericsson’s standpoint, there were at least two advantages to the new model. “We saw it as a positive trade-off between what ATCLE would charge us compared to the cost of bringing this blister pack product from Asia,” Correal says. “We also saw an opportunity not only to save on transportation but also as a way to bring final customization of the product closer to our customer in Dallas. That gave our customer more flexibility with respect to the customization they wanted to make right up until delivery.”

Inserting pamphlets or promotional material or even bundling accessories is the kind of last-minute customization a client may want, says John Bauschka, senior director of business development at ATC Logistics & Electronics.

“By doing it just before it hits the store, so to speak, we’re able to give the marketing folks a little more flexibility in making those decisions later in the program. Then we get everything bundled together, do our production and get it off to the marketplace.”

ATCLE already was providing the carrier order fulfillment and return and repair services when the packaging initiative was broached. As the customer was mutual, Bauschka says, “It was in the interest of both of us to make that client happy.”

The parties studied the alternatives, but the economics argued against palletizing, say, 200 units in Asia and flying them to Texas versus shipping 800 to 1,000 in bulk for final production.