A $350M Philadelphia-based appliances and electronics wholesaler serving independent retail stores wanted an objective assessment of where they could save money in their distribution and logistics operations. While their logistics network involved 11 distribution facilities, the scope of the assessment was limited to their Philadelphia headquarters (corporate-wide transportation) and local Distribution Center (DC) operations. 100% of merchandise volume moves from vendor (domestic transactions) to their internally operated DCs and then out to their customers on a "pull order" basis.
Process & Results
Distribution Area:
Gathered data and interviewed employees/stakeholders
Flow-charted select processes
Performed some simple time studies and observational work
Findings:
Bin-profiling/slotting was talked about but not executed
Sub-optimal performance management and use of order-batching process
Poor work flows
Recommendations:
Profile/slot bins by order velocity
Eliminate multiple products stored in same pick facing
Optimize batch size
Re-configure check/pack/ship area
Implement daily Performance Management routines
Total Projected Savings in area (exclusive of any investments that may be needed): ~$221K
(This is for one single location. Based on size of other sites and extrapolation, projected company-wide savings is $750K)
Logistics/Transportation Area:
Gathered data and interviewed employees and stakeholders
Flow-charted select processes
Did some rate benchmarking with other clients and networking contacts
Findings:
UPS pricing not optimized
Use of too many LTL carriers; no leverage
Poor routing system (rudimentary TMS) maintenance
Limited freight bill audit & payment processes due to internalization of same
Recommendations:
Re-negotiate/re-bid small package pricing
Consolidate LTL carrier relationships to <40 network-wide (from >80)
Re-negotiate pricing with surviving carrier partners
Develop routine routing system maintenance protocols to insure accurate data
Outsource freight bill audit & payment processes to improve quality of audit
Total Projected Savings in area (exclusive of any investments that may be needed): ~$668K
Final Results and Impact
Projected Savings in Distribution Area $750,000
Projected Savings in Transportation/Logistics Area: $668,000
Total Company-Wide Cost Savings Identified: $1,418,000
The client had pre-determined internalizing all execution, so the assessment document was used as a "roadmap to savings".
