Help Getting New Products to Market

03

Our Logistics costs are going to be huge and what we do is too complicated

Volumes are forecast to double in the next 4 years and on current forecast so is our Logistics spend
What problem where we trying to solve?

Of course, if volume is going to grow we expect to spend more on Logistics but should it be a “one for one” relationship? What about economies of scale and efficiency improvements?

Why did we have this problem?

The physical logistics solution for brining in compoenets and raw materials and delivering finished product had evolved over time, with new activities being added without a complete re-engineer. This meant we had some sub optimal solutions. For example we had multiple service providers active on the same delivery lanes which led to two main issues 1) multiple hand offs as product made its way to its destination & 2) lack of transparency of status and process. Both of those issues led to inefficient operation and decision making.

The solution

We completed a full review of the service required by the business and then ran a complete re-tender of all Logistics. The aims we set were outcome driven not solution driven i.e. we asked the experts how they would achieve the service levels we desired. This resulted in a complete remapping of each service line and ultimately ended up with separate service providers on each service line. In addition the service providers supplied It solutions that integrated into our normal business operations and gave greater cost and deliver performance transparency

So what?

Significant cost reductions. Not only did we arrest the doubling cost forecast we actually reduced the overall cost per unit of delivery meaning we delivered 100% increase in volume for a circa 30% increase in overall cost. In addition the partnership agreements we created with service providers gave greater long term security for them, so they could keep investing to reduce our overall cost.
How hard was it, really?

On the face of it this was a standard tender exercise. However, the lack of good data & information meant our operating wisdom was poor. This could have led to a situation where we ended up paying for things we didn’t really need. To overcome that required a level of partnership and trust, between the service providers and customers, that could only be gained with an open win-win approach. In addition the internal challenge was also considerable – developing a solution and getting people’s acceptance to change is no small task in any organisation, let alone a large matrix organisation.

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