Enhancing financial performance through strategic cost reduction initiatives : an investigation into cost efficiency gains related to print- and distribution processes in a global newspaper supply chain

Abstract

In this thesis, we investigate different approaches to enhance financial performance through strategic cost reduction initiatives related to print- and distribution processes in a newspaper supply chain. First, we examine the processes of print and its corresponding cost drivers. We run regressions and marginal effects in order to estimate the most predictable cost, subject to certain constraints regarding pages and volume. Our findings indicates that pages has the largest impact on the cost of printing. Thus, we obtain reduced cost with 95% certainty by introducing a standardised approach in line with their strategy. Then, we examine distribution and seek to minimize the cost of transportation, delivery and packaging. We construct an unbalanced multi-product transportation model and use linear programming to minimize our objective function, subject to constraints regarding regional demand for each newspaper. Our findings indicates that an optimal allocation will result in reduced cost and is a more efficient with respect to the current strategy. More interestingly, we find a causal linkage between print and distribution. Where standardisation of print would ultimately reduce the cost of distribution, due to less weight and number of items sent. We extend our investigation and introduce a measure for further reduction of distribution cost and find that discrimination of subscribers have a negative impact of total distribution cost. After streamlining the operations we expand our analyses to investigate the impact of exchange rate fluctuations on the financial outcomes. We run a sensitivity analysis to expose the vulnerability of each newspaper with respect to depreciation and appreciation of the exchange rate. Our findings indicates that standardisation and optimal allocation will not change the relative sensitivity between the newspapers, but fluctuations will affect the total cost. Finally, we find that standardisation and optimal allocation will enhance the overall financial performance due to cost reductions in a more efficient supply chain. Although these reductions would ultimately depend on the exchange rate, we argue that our strategic approach would enhance financial performance more in comparison to the current practices.