How Safecube enables positive and quick Return On Investment on most of your shipments
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.
* 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