Cost Optimization in Supply Chain Management : Case of a Finnish Distributor of Cosmetics

Abstract

Costs are inevitable elements which appear in every activity in the supply chain: from procurement, to transportation and warehousing. The expenditures spent in supply chain activities open a topic of how supply chain could be optimized financially. With the focus on cost optimization, a business does not only reduce its short-term spending but is also benefited with resources for long-time investment. This thesis discusses different elements of cost optimization in a supply chain, especially from the viewpoint of a small Finnish cosmetics distributor. The thesis starts by providing different models to evaluate supply chain performance and common metrics to assess supply chain both operationally and financially. The section is followed by different costing techniques and how supply chain costs are defined. Different toolkits and practices for cost optimization are then presented in terms of purchasing, transportation and warehousing. Cost optimization should come from every single element of the supply chain, which are related to each other and contribute to the improvement of the whole chain. Both qualitative and quantitative data was collected to provide a coherent and convincing support for the thesis. The theory was followed by the case study of a Finnish Distributor of Cosmetics - company X, to examine real-life application of the findings. The case study consists of an overview about company X, how supply chain of company X is operated and the author’s suggestions for improvements of the supply chain. Data collected for the case study comes from interviews with Company X’s Chief Operating Officer and Demand Planner. The case study also incorporated the author’s observance while working as a Purchasing Assistant for the company. The thesis inherited results from existing studies, and the outcome proposes further development of cost optimization processes in supply chain management. The thesis aims at providing small-and-medium-sized companies with tools and tactics necessary for cost optimization process. The case company is a demonstration of how these methods applied in the scope of a Finnish small-and-medium-sized company. Further research is needed when applying these methods to other companies of different scale and different industry.