One of the biggest and most accessible earning you can expect from better visibility on your shipment is in-transit stock reduction. Translating capital reduction into recurrent savings is possible, through a standard rate called WACC (Weighted Average Cost of Capital). Usually this rate is between 8% and 12% but some fast growing industries can potentially use a WACC of 15% to 20%. For our exercice, let’s consider a “conservative” WACC of 10%.

 

The average value of a regular container is usually between 50k€ and 100k€. It of course varies a lot depending on the industry (if you’re in the electronic of the health industry it can be counted in M€). Our objective being to address the majority of the transportation market, let’s consider it at 50K€ per container.

 

The last parameter you’ll need is the cost of your tracking services. Safecube solutions will probably cost you 20 to 35€ per shipment (depending on volumes and destinations). Let’s say 25€ per shipment.

 

I’ll make it easy for your and do the math*. In those conditions, if you want to have a positive ROI on your tracking services you need to save at least 1.8 days of inventory. To put this number in perspective, if you had to pay 100€ per shipment (usual cost of GSM tracking services) you would have to save at least 8 days of inventory.

 

Reducing 2 days of inventory with full visibility on your End to End intercontinental shipment is very accessible (I’ll walk you through some concrete examples in my next post). Reducing 4 to 6 days is possible but requires some focus, and agility. Going above will be very difficult.

 

In conclusion, if your good are worth millions of euros, you’ll just need a reliable solution that works and you will not really care about the price. Otherwise, Safecube is the only solution today that can give you access to a quick and accessible ROI for the vast majority of intercontinental shipments.

 
 

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* If you want the details of the calculation here it is!

 

X is the inventory reduction (in days)

Y is the average number of container you are shipping every year

 

The value of your inventory reduction is X/365 * Y * 50k€

The yearly cost of your tracking services is (Y * 25€)

 

You want to make sure that you’re saving more than you’re spending, which means

inventory reduction value * WACC > Yearly cost of tracking services

 

If you replace that by the formula above:

X/365 * Y * 50k€ * 10% > Y * 25€

X > (25€*365) / (50k€ * 10%)

X > 1.8 days