Case Studies
Case Study 1 - Cost-to-Serve Trade-off
A retailer wished to reduce stock holding of a range of suppliers' products and wanted this to result in the most cost-effective solution. For the retailer it was important to be given a tool that could be used to identify solutions per supplier that provided a breakdown of supplier and retailer operating costs for different scenarios.
A cost-to-serve model was developed which evaluated the trade-off between inventory and storage costs of the retailer and supply costs of the supplier. The model was parameterised with delivery size/frequency, product value, transport and storage costs and enabled the retailer to identify optimum delivery frequencies and the off-optimum costs to use in negotiations with suppliers to make the required changes.
Below is a sample illustration of the cost-to-serve analysis (NB the data has been sanitised to make it anonymous).
Case Study 2 - Production Plant & Planning Strategy
Key Services #2 - Manufacturing Cycles and #15 - Scheduling
A manufacturer of short-shelf-life goods was struggling to maintain service levels to customers and, at the same time, finding total profitability falling. The manufacturer needed to identify the root cause of the problems and to develop a plant and planning strategy to deliver target levels of service and costs. The production process involved multi-stage conversion operations with short-term storage in between conversion stages and of finished goods for assembly and despatch to customer.
A production cycle model was used to identify that the root cause of the problem was the level of item complexity throughout the plant combined with inappropriate planning and operational strategies. (Complexity had gradually increased 10-fold in the 10 years since the plant was built). A flow analysis and design process was used to identify a combination of production sequences and intermediate material holding levels that enabled the plant to return to a manageable situation. The planning rules were re-defined to conform to the new sequences and operational rules.
The same analysis identified some practical limits to complexity that could be handled by the existing plant and also areas of investment to increase plant capacity in an optimal manner.
A sample illustration of the analysis of the existing plant daily cycle timing is shown below (NB the data and references have been sanitised to be anonymous).
Case Study 3 - Manufacturing Distribution Strategy
A UK manufacturer wished to develop a strategy for storage and distribution of his finished goods to customers throughout Europe that would allow service levels to be improved and total costs to be reduced. The manufacturer had a number of manufacturing sites throughout the UK and served customers in all parts of the UK and all countries in Europe.
First, using basic keep-it-simple logistics principles, the basic flow requirements for the goods were identified and the stages of storage and shipment defined. Geographic modelling was then used to identify the preferred numbers and locations of storage/shipment points and to provide the manufacturer with indicators of off-optimum locations operating costs.
A sequenced development strategy was developed with the manufacturer and a series of changes were carried out over 7 years to greatly rationalise the distribution network, enable stock reductions to be made and operating costs to be saved.
Case Study 4 - Warehousing Optimisation
A UK retailer with a number of regional distribution centres had identified significant unit cost differences between the distribution centres and wished to develop and implement a best-practice project to improve his operational costs.
The project was tackled in three stages. First, a parameterised model for the distribution centres was developed which enabled the different costs drivers of each distribution centre to be separately accounted for. Differences in throughput, complexity and location-driven costs enabled the cost differences due to operational practices to be identified and evaluated.
Secondly, best-practice was identified for a number of different activities and the distribution centres brought up to speed with their relative performances.
Finally, the root causes of the major cost differences (which were location driven and service-requirement driven) were identified and evaluated and recommendations were made as to how these other costs could be reduced by changing the network operations and the respective duties required of each distribution centre.
Case Study 5 - Order Fulfilment Cycle
A manufacturer, under pressure from retailers to improve his order-to-delivery lead-times needed to identify what would be practical, at what cost, and how to achieve it.
The time-based analysis of the manufacturer's order cycle identified a number of key areas which would need to be changed and the relative importance of each. The different areas included the order capture process itself, the whole process of building despatch plans and delivery schedules as well as the actual physical issues of stock management, despatch and transport.
The end result was a successful multi-year set of projects to realise next-day delivery of the bulk of orders and 2nd-day delivery of most of the remainder for the whole of the UK. As a result of changes to stock disposition and transport deals, the only additional costs were the changes to internal processes and systems.
Case Study 6- Direct Factory to Customer Deliveries
A manufacturer was determined to realise direct delivery from plant to customer as part of a major "lean" initiative to reduce operational costs. In order to achieve this, investment in plant despatch capability was required as well as changes to UK and international transport operations to withdraw from stock-holding/consolidation locations.
In fact, detailed analysis showed that the direct-delivery proposal would be sub-optimal because of the combination of numbers of customers, items and plant production cycles. Significant and impractical increases to production frequency and/or reduction in customer delivery frequency would be necessary. Investigations also showed that there were significant misunderstandings of the nature of the successful "direct delivery" examples given to the team.
Today there are no direct deliveries made from this particular plant to the final customer.
Below is a sample illustration of the results of the delivery frequency analysis (NB the data has been sanitised to make it anonymous).
Case Study 7- To tender or to develop?
A French client wanted to run a tender for their national warehousing and distribution in another EU country, run mostly from a large third party warehouse operated by the supplier as a shared user facility. The client’s view was that the warehouse was already expensive but the supplier was pushing hard for an increase to rates.
A study revealed that although the supplier’s warehouse was poorly utilised, and the equipment old and in poor condition, his prices were amongst the cheapest, and his service and quality were excellent. In addition a market survey revealed little credible competition and that the shared user portfolio kept transport costs low.
Instead of tendering, the client was persuaded that a change program be implemented at the warehouse instead. The subsequent project upgraded the facilities to a more appropriate standard, improved utilisation and handling practices, maintained the quality of service and extended the notice period. Throughout the change process, service and quality to the client’s customers was maintained. No price increase was awarded, the notice period was extended, and good relations between the client and the supplier were restored. Apart from the initial investigation work and subsequent recommendations, the client carried out the changes themselves with only guidance and support from one of our team.
Case Study 8 – Managing a major network transistion
This UK client asked what his next improvement project could be. The response was a proposal to consolidate three third-party warehouses into two, saving considerable running costs. This required a stock reduction project, which by itself delivered a significant one-off reduction in assets. The two surviving warehouses required projects to increase their handling and picking capacity.
A particular feature of this project was the way that issues such as TUPE and the potential closure of one of the warehouses were managed. Significant flexibility was given to the target warehouse to attract a replacement client. This paid off, and the client was able to withdraw six months early when the 3PL won new business, contingent on immediate availability. This generated an early saving in rental, avoided bad press and removed the TUPE issue completely. With the application of detailed project planning and business process testing, the transition was completed early and with no interruption to customer service.
Case Study 9 – Utilising Supplier Capability
This UK client was under pressure from his largest customer to have bar codes on all their traded units. For products sold in trays he had three options: pre printed, in-line labelling, or in-line ink jetting of the bar code directly onto the filled trays. After considering the mix of investment and running costs, the client had already started to implement the ink jet proposal. However, the project was running late and the customer was unhappy. The client decided to implement a temporary solution with pre-printed trays and asked for help with managing the supply chain issues.
A review with the supplier showed that it was possible to change the way that the trays were ordered, taking advantage of the way they were manufactured and stocked by the supplier. The ink-jet project was cancelled and the new printed tray route was implemented within a few weeks. Subsequent negotiations by the client with his tray suppliers enabled further reductions to the annual on-cost.
Case Study 10 – Specifying and Tendering Finished Goods Transport
A UK manufacturer had recently merged several different operating companies and wanted to move to a combined finished goods network. An early enabler to this was to move to a shared carrier base for the outsourced finished goods transport to customer. It was decided to make the change through tendering the new combined portfolio of transport movements.
As the previous operating companies had managed outsourced distribution independently, the first step was to establish the operating specification. By working closely with the distribution operation teams, parameters and policies on issues such as sales order transmission, pallet control, performance standards and bonuses, warehousing constraints and returns management were all discussed and agreed in detail. Input was also taken from existing carriers. Commercial decisions such as the length of the award, target number of carriers, treatment of additional charges, payment terms and award criteria were also reviewed and decided upon.
When tendering transport particular care is required in the volume data that is given to the carrier, particularly if there is significant seasonality or daily variability. This is particularly true of part load work where additional information is required for prospective carriers to determine how loads may be built up, and likely achievable load fill. For many companies accessing this type of historical data and combining it with a view of the future is a challenge.
In addition to establishing the specification for the service, it was also important for the success of the tender to ensure that the internal operational teams were prepared for a change to the carrier base and capable of managing any transition to a new supplier. This was achieved through significant internal dialogue, by consulting the operational team on the choice of carriers and by introducing them to likely new carriers before final commercial decisions had been made.
A final vital step for the success of the tender was the identification and contact with potential new carriers. This was achieved by early contact, warm-up through the use of a pre-tender qualification form and tender launch meetings.
The tender was run on the Freight Traders™ platform and as a result of the above efforts resulted in vigorous bidding, a significant change to the carrier base, a financial saving to the manufacturer and, most importantly, a long term improvement in carrier performance.
Case Study 11 – Supplier Analysis leading to a new engagement strategy
A UK manufacturer had outsourced all of its physical logistics services across Europe to a mixture of small, local and large international 3PL providers. A supplier and market review of all these logistics services in the UK was conducted by one of our team. In this review issues such as the attractiveness of the work to the supplier, the ease of finding alternatives and the mutual dependencies between the companies were all assessed. Summary sheets for all services and all suppliers were then written and formed the basis for all subsequent contract reviews.
As an example, it was identified that a certain local factory logistics supplier had become far too dependent on the fortunes of one manufacturing site, while that site had sub-contracted so many activities to this supplier that finding an alternative supplier or benchmarking the services would be very difficult. At the same time the manufacturing site was planning to outsource another type of service to this company, further increasing the dependency. As a result of the analysis support was won to overturn this decision and an alternative solution was found.
Case Study 12 – Priority setting in Distribution Procurement
In many companies national transport buying is left to local buyers with little central policy setting and prioritisation. Against this trend, a member of our team was asked to pull together a Procurement Strategy document for distribution transport for a major FMCG shipper. The output of this work was a document and a buying strategy that aligned the local buyers of these services to the overall company’s goals and clearly laid out the pan-European priorities in this area.
For the strategy to work it was necessary to understand the differences in customer delivery requirements and key market parameters (such as order size) across the different countries. Three models for success were determined based on the different nature of the service being bought in the countries involved. However common issues, opportunities and priorities were also identified and a pan-European action plan put in place to increase the success of all distribution procurement. These common opportunities included improvements to systems, agreement on best practice for tendering and supply chain training for the buyers.
The strategy and action plan were written with the full involvement of the local buyers and several interactive workshops were run to ensure their involvement and sign-on. The individual actions agreed upon were incorporated into the buyers’ objective setting process with their line managers.
Case Study 13 – Change to a Finished Goods Network
This UK manufacturer asked for advice on improving his finished goods network. The response was a proposal to consolidate three third-party warehouses (100kp total capacity) into two (60kp), saving £5m/year in running costs. This would require a stock reduction project, which by itself delivered a one-off £15m reduction in assets. The two surviving warehouses required projects to increase their handling and picking capacity, both implemented without incident.
A particular feature of this project was the way that issues such as TUPE and the potential closure of the 40kp target warehouse were managed. The client was advised to give the target 3PL warehouse considerable time flexibility to assist in attracting a replacement client. This paid off, and the client was able to withdraw six months early when the 3PL won new business, contingent on immediate availability. This generated an early saving in rental of £1m and removed the TUPE issue completely (previously a potential exposure of £600k). A bonus for the client was that the expected bad press following the unemployment of over 100 warehousemen was avoided; in fact many new jobs were created.
In addition to the three warehouse projects, it was recommended that the manufacturer change the despatch facilities at their two largest factories to take advantage of the latest vehicle technology and weight legislation. This generated a separate project that delivered an additional £1m/year reduction in factory and logistics running costs.
Case Study 14 – Combining networks to provide a better and cheaper service
A European manufacturing company had just consolidated separate parts of its business. The challenge was to consolidate the separate logistics networks into one that could deliver a combined order to those customers that wanted it, and to do it at no more than current cost. The company did not believe that there was a cost saving opportunity. The problem was that the products had always been viewed as incompatible due to differences in the storage temperature required, height, weight and the risk of cross contamination by taint, odour or infestation. The separate networks had few suppliers in common. The company was addressing the differences in the business processes and order processing procedures.
A map of the complete finished goods network was constructed showing all the movements and storage locations. A review was carried out of the capabilities and potential of the major finished goods warehouses in the network. The 3PLs were asked to provide proposals for converting their warehouses to deal with the combined products in specified proportions and quantities. In parallel, the company was asked to estimate the possible uptake of combined orders over a five year period. From this work came the conclusion that only part of the network needed to change.
It was proposed that a new warehouse be commissioned near the centre of gravity of the manufacturing company’s combined customers. In addition to replacing one of the existing warehouses and a lot of outside storage, it would be able to support the early adopters. The cost of the project would be more than offset by the reduction in outside storage and reduced transport costs. A full warehousing specification was produced and a competitive tender was run for the replacement warehouse. The winner was the at risk warehouse when it made the case for a massive upgrade in capacity and capability. Completion of the project made significant financial savings in its first year. The work done here laid the groundwork for a complete change to the network strategy, which subsequently led to a further massive and beneficial change program.
Case Study 15 – Using Vendor Assurance to support the provision of services
Maintaining the continuity of supply of your products to your customers is of critical importance. Vendor Assurance techniques have long been used to support the supply of raw materials and finished products and, used appropriately, Vendor Assurance techniques also support the provision of critical logistics services. We have a structured approach to this that covers all the major threats to the components of your supply chain. The use of VA techniques is part of our overall approach to managing risk, for new projects or services as well as for ongoing activities. There is no separate case study for this as we use it constantly and not as an end in itself. We would be happy to discuss this further.
Case Study 16 – Supporting a supplier to achieve his potential
After a review of suppliers of logistics services to a large FMCG company, a particular local 3PL was identified as being strategically important because of its location, service quality, cost base and the unique portfolio of services it was able to provide. However as a small, local company it lagged behind the larger multi-national 3PLs in its ability to adapt to market changes and make use of technical developments.
As part of an agreed strategy we engaged with the supplier to alert them to the risks and opportunities the changing market might bring and encouraged them to review their business in order to be ready for any significant changes in their customer’s requirements. Over the next two years the supplier was able to successfully win an open, competitive tender for a new warehouse. However at the same time they decided not to provide certain other logistics services to their customer, realising others had greater expertise in this area. Having made this decision for themselves they co-operated with the new provider of these services and the customer was able to benefit from a smooth transition to the new supplier.