SUPPLY CHAIN TRANSFORMATION CASE STUDY
Optimizing Supply Chain for Storage and Freight Savings
Flows of Supply Chain Management
- Freight Operation
- Optimized Storage
- Reducing cost of Service
- Procurement of Finished goods
- Revenue Optimization
Client overview
- Our clinet is a well-established and financially stable organization that is considered an industry leader, with significant resources and a sizable market share
- The client is seeking ways to lower the cost of service in order to enhance overall operations.
- We are hired to optimize the business operations
Scope for this project
- The scope of this project encompasses assessing existing processes, determining opportunities for enhancement, and executing cost-saving strategies.
- The focus will be on streamlining production, Supply Chain optimization, and creating 8 business transformations
Methodology
- The project team will use a combination of market research, data analysis, and internal process evaluations to identify areas for improvement.
- They will also engage with suppliers, stakeholders, and customers to gather feedback and implement changes.
HIGHLY COMPETITIVE INDUSTRY
Project Objectives
- Improve the efficiency of the production process.
- Diversify procurement process and sources.
- Reducing cost of service by optimizing freight and inventory
- Creating immediate and long terms savings
- Transforming business process.
Latest Trends in Blue Chip Companies
- Blue chip companies are increasingly adopting advanced inventory management techniques such as just-in-time (JIT) inventory and demand-driven inventory management (DDIM) to minimize inventory carrying costs and reduce waste.
- With the rise of e-commerce, blue chip companies are focusing on improving intercity freight management, including the use of technology such as transportation management systems (TMS) and real-time tracking, to optimize delivery times and reduce costs.
- Blue chip companies are seeking ways to reduce the cost of service, including the use of technology, outsourcing, and process optimization, to remain competitive and increase profitability
- Many blue chip companies are facing increased competition and low profit margins, and are looking for ways to improve operational efficiency, reduce costs, and increase revenue, through measures such as mergers and acquisitions, cost-cutting, and expansion into new markets
Customer Trends
- Customers of blue chip companies are demanding faster delivery times, often same-day or next-day, and are willing to pay a premium for this service.
- Customers are becoming increasingly cost-conscious and are looking for ways to reduce delivery costs, such as opting for slower delivery times or choosing alternative delivery methods
- Customers of blue chip companies are demanding more variety in terms of product offerings and are looking for personalized and customized products to meet their specific needs
- With the rise of e-commerce, customers are becoming increasingly aware of return shipping policies and are looking for companies with simple and convenient return processes
SUPPLY CHAIN pROBLEM DETECTION
attack the ROOT CAUSE or the SYMPTOMS
Key Diagnostics Questions:
- Which of the five flows of supply chain is the most important in this case?
- How is this flow impacting rest of the flows to make supply chain inefficient?
- Where, exactly, are the flow disruptions in this supply chain, and what are root causes?
- What is the business impact of these supply chain flow problems?
- Which of these problems are worth fixing, and how to do so?
which supply chain flow controls the profits here?
What supply chain projects will adequately fix the root causes Forever?
Initial Assessment of Client problems
- Buying Finished Goods: our client face challenges in sourcing finished goods at competitive prices, while maintaining quality and delivery standards.
- Primary Freight: Our client faces challenges in managing both primary and secondary freight, including coordinating delivery schedules and ensuring timely and cost-effective delivery of goods, as well as delivering goods to customers in a prompt and economical manner
- Primary Storage: Our client faces challenges in managing both primary and secondary storage, including finding adequate and cost-effective storage solutions and managing inventory levels to minimize waste and reduce costs for both finished goods and primary storage.
- Increased Service Cost: Blue chip companies face challenges in managing increased service costs, including managing labor costs, transportation costs, and energy costs.
Neglecting Supply Chain Optimization:
The Consequences
Key assessment Criteria:
- Increased costs: Inefficiencies in the supply chain can lead to higher costs for procuring, storing, and transporting goods.
- Stock shortages: Poor inventory management can result in stock shortages, leading to lost sales and dissatisfied customers.
- Waste: Unoptimized storage and inventory management can result in overstocking, leading to waste and higher costs.
- Inefficient use of resources: Inefficient supply chain processes can lead to the inefficient use of resources, such as transport vehicles, storage space, and labor.
- Reduced competitiveness: A poorly optimized supply chain can lead to reduced competitiveness in the market, as other companies are able to offer better products and services at lower prices.
- Increased risk: Risks such as supply disruptions, increased lead times, and higher costs can lead to increased uncertainty and potential financial losses.
Data Analysis Uncoversing Problems in Detail: Insights for Improvement.
- The high cost of procurement of finished goods are a result of various factors such as high demand for raw materials, production cost, and labor costs.
- Having multiple redundant storage can result in excessive overhead costs, such as rent and maintenance of the storage facilities. It also increases the risk of damage to goods, which can result in additional costs.
- Intercity freight costs can be significant, especially if the company has to transport goods over long distances. This can result in increased costs and affect the company's bottom line.
- The cost of service can include the cost of providing customer support, technical support, and warranty services. These costs can be significant, especially for companies that provide high-end products or services.
PROJECT COMPLICATIONS
the right solution to implement
why?
- Confusion between logistics and supply chain management
- Mismanagement in the remote locations and lack of control over the regions
- Lack of real suply chain know-how in the business
- Expecting miracles and magic pills from supply chain
- Weak position of supply chain personnel on the totem pole
Data Collection: Key to inderstanding Business
- Accurate forecasting and demand planning was achieved by collecting B2B, B2C and stock transfer data for a period of 34 months
- For more efficient data analysis and machine learning, the collected data was cleaned and organized.
The Importance of Data Analysis
- Data analysis helps a company optimize inventory, reduce excess stock and improve forecasting accuracy, leading to lower storage costs and reduced waste by providing insight into inventory levels, sales patterns, and supplier relationships.
- Data analysis helps identify storage inefficiencies and opportunities for optimization, improving space utilization and reducing storage maintenance costs by identifying underutilized spaces.
- Data analysis of sales data helps identify profitable products, customers, and sales channels to optimize pricing, product offerings, and marketing strategies, leading to increased profits.
Key Actions for Improving: Driving Success
Streamline service processes:
- Automate customer support and technical support processes to reduce the cost of service.
- Implement self-service options, such as online help guides and FAQs, to reduce the need for human support.
Train employees to handle customer support inquiries more efficiently.
Reduce procurement costs:
- Negotiate with suppliers to secure better prices for raw materials and finished goods.
- Explore alternative suppliers or source materials from new regions.
Implement just-in-time (JIT) inventory management to reduce the amount of inventory held.
Improve intercity freight processes:
- Evaluate alternative shipping methods such as sea, air, or rail freight to find the most cost-effective option.
- Implement routing optimization to reduce shipping distances and improve delivery times.
- Consider partnering with other companies to share shipping costs.
Optimize storage processes:
- Consolidate multiple redundant storage facilities into a single, centralized location.
- Improve space utilization by optimizing storage layouts and reducing empty space.
- Automate inventory management processes to reduce manual errors and improve accuracy
Our Recommendations
- Based on our analysis we provided data on how to optimize their procurement process. This was one of the major factor driving up the costs.
- We suggested some variations in storage planning, as redundant storage increases overhead expenses in long run.
- We tested 8 different business transformation projects for the clinet.
- We pilot tested each scenario, collected market respose and modified the models to fit our client.
Time to conduct Analysis, Pilot Projects & Documenting Results
- The process of conducting the preliminary analysis took 4week, followed by 24 weeks of additional analysis aimed at optimizing shipping costs.
- An additional 6 weeks were required to present the findings and gain approval from the board
PROJECT RESULTS
Achieving Our Goals
Almost everyone got what they expected from this project
- Used technology to make efficient supply chain.
- Improved customer satisfaction by improving delivery time.
- Our optimization saved $5M in short term and another $12M in mid term and expecting similar in long term.
the project had its detractors in the beginning
Detractors were won over by the project success
Project recap
- The client is a well-respected and established company in the Blue Chip category.
- The client is looking to reduce the cost of service through optimizing procurement, storage, and shipping expenses.
- Our objective was to solve client problems and provide 8 different business scenarios.
- Client also tasked us for total business operation transformation which is an undergoing project.
- With our recommendations, our client saved $5Mil in short term and $12Mil in midterm.
Learnings that can be applied across the industry
In oligopoly, small cost advantage can make the difference between being the shark, or being the bait.
We have often wondered why our team succeeded where some of the best consulting names in the world failed to deliver results.
- Unlike our predecessors, we have used the supply chain analytics model to create and compare alternate business models.
- Turned around the business with no hope and brought the business from third (last) in the industry to first by engaging the entire business.
- Saved the business from being a target for takeover.
- Five years later the business was able to take over one of its competitors.