North Pole Ltd. has a unique business structure. The non-profit is a large manufacturer and also maintains all of its shipping and logistical responsibilities in house. The president and founder Santa Claus started the organization in order to deliver Christmas toys to deserving children around the world. Like any shipper, they struggle with freight damages. However, Claus knows that it only takes one damaged package to ruin a child’s Christmas.
Ensuring No Child’s Toy is Damaged
In order to avoid this issue, Claus checks each and every one of his gifts for damage after they are placed under the tree. (He currently holds the patent for AntiGrinch, his handheld damage detection system.) However, once he finds a damaged gift, it needs to be replaced.
The damaged package is scanned with their RFID system, and the order is sent to the nearest Major Expedited Replacement & Repair Yard (MERRY). “We make extras of the requested toys, specifically as replacements in the case of damage,” says Claus. Supplementary teams deliver the replacement toys to the houses that need them so Claus can continue on his route. They will even repair the toys in the home, where possible.
While the extra inventory of replacement toys works most of the time, sometimes they run out, and sometimes toys cannot be fixed. There’s also the issue of rarely requested toys that they don’t make replacements for. This is where Expedited Lean Fabrication (ELF) comes into play. “We have a team that will make the necessary toys from scratch.” This is all in the name of ensuring that no child wakes up to a broken toy.
The Cost of Replacing Damaged Toys
“A 5% damage rate doesn’t sound like much, but when you average 10 billion toys per year, that’s 500 million toys,” says Claus. “Of course, we try to be as generous as we can, but we do have a budget, and the damaged toys eat into that budget.” And the costs are huge, since the cost of MERRY’s process is sometimes twice the cost of the average toy, and toys made through ELF can be as high as 10 times. “If I had a 0% damage rate, I could give out an extra 1 billion toys, easily. But that’s what I need to do to ensure that no child opens up a damaged toy on Christmas morning.”
“It seems the most popular toys are also the ones that are most prone to damage. Electronics, paints that are prone to leaking, craft kits with breakable little pieces.” Claus sighs. “I never have an issue with clothes. Kids don’t want clothes, but I send them anyway because they don’t get damaged.”
Tracking and Preventing Damage to Toys
It was only two years ago that Claus started using MyEZClaim Freight Claim Management System to help him track damaged gifts. “The data I gained from the system was incredible,” says Claus.
Down the Chimney
A key feature is that the system allows custom fields. It was the first time MyEZClaim had ever listed a field called “Chimney”, but it was essential for Claus to track.
“I quickly realized that 10% of my damages came from houses with chimneys. While it was once my most effective delivery method, chimney construction has changed over the years, and it turns out the gifts are more likely to be damaged when delivered this way.”
A Bumpy Sleigh Ride
Then there’s the ability to sort damaged toys by route. “The system shows a map with all my shipping routes, and it was clear that some of them have higher damage rates than others,” Claus explains. “It turns out that some routes put the sleigh through some pretty strong turbulence.” And to correct the issue? “Now I use extra dunnage bags and straps on those routes to keep the toys from moving.”
Another key feature that Claus found useful is the ability to sort shipments by multiple fields. At a glance, electronic gifts did not have a noticeably high damage rate. However, when toy type was sorted by region, a pattern emerged.
“Electronic toys delivered to the tropical regions were being damaged by the high humidity. When you spend all your time up North, and it’s so cold and dry, humidity just isn’t something that you think of.” Since realizing this, Claus has adjusted electronic toy packaging based on the region. Electronics going to tropical regions are given more drying agent packs, or utilize fully sealed plastic packaging instead of cardboard. “But I can keep the packaging costs lower in dryer regions, because humidity damage just doesn’t happen there. And now we know that.”
MyEZClaim also allowed him to identify issues by individual plants. “When I noticed a difference in damage rates for china dolls coming out of two of my plants, I didn’t understand why. It turns out, one of the managers had implemented a SCROOGE initiative (Simple Cost Reduction Out Of General Expenses) and they had switched to a thinner grade of foam. I’m a huge fan of lean initiatives, but now we know that it was costing more in damages than it was saving.”
The Results Are In
So what is the end result? “Thanks to the data I got from MyEZClaim, I was able to reduce damages by 20% last year. That means that this year, I don’t need the same budget for replacements. Instead, I can give out 200 million more toys.” He smiles a big smile. “And this year, I don’t have to give out clothes!”
Not a Believer Yet?
Mr. Claus isn’t the only provider of Christmas gifts who uses MyEZClaim.
Click here to download our case study with Best Buy.