Linkedin Facebook Twitter Youtube Envelope Whatsapp
Get in Touch

This Supply Chain Transformation Case Study Illustrates How Streamlining Inventory Management and Transport in Warehouse and Supply Chain Operations

“ Trade isn’t about goods. Trade is about information . Good sits in the warehouse until information moves them “ ~C.J Cherryh

Some Key objectives from this project

The start of the project

  • The client skeptical to invest more into SCM development
  • The client find it hard to believe they can save 30% in warehousing.
  • Client too much reliant on 3PL service proviers.

During the project

  • The 2 new proposed model were tailor made for the client who operates in ASIA, Australia and New Zealand.
  • Some warehouse locations needed to be closed due to being redundant or lack of connectivity.
  • Demand analysis was made by implementing Saas for proper warehouse storage.
  • One of the goals was to reduce the chance of overstocking and understocking.
  • Improved inventory had a positive domino effect on transportation (sea and land)

After the Project

  • Getting the board to accept our proposed models were hard. After pilot testing out models and a few suggestion , the board was astonished at the reduction of overhead costs.
  • Further reduction in costs of distribution were available by implementing our suggestions to calibrate their distribution system.
  • The client decided to implemented a model which was a hybrid of the two models we suggested, i.e A hybrid distribution with some aspects of two-tier model.
  • Shutting down multiple warehouses , improving the distribution by better insights helped company save $20.7 Million compared to FY2005.

Maximizing Success in a Highly Competitive Food and Industrial Products Market

High margin, Huge volume , No room for error

  • Top three companies– needs competitive prices to attract consumers
  • Sensitive industry – not a lot of opportunity for trial and error
  • Moving industry- one bottle neck and you loose big
  • Warehousing and storage – the key to cracking this space
  • High risk = High rewards
  • Food market – Stagnation creates loss as spoilage is a guarantee

Optimizing Operations in a Multi-National Company: A Case Study of Success in Australia, New Zealand, and Asia

png map image of product flow to asia pacific

Description of the company we were working with

  • The company is a Top 3 player in Food and Industrial product in Australia, New Zealand and Asian markets.
  • The company has suffered from their complicated relationship with their 3PL Service provider.
  • The company often had disagreement with their 3PL Service regarding overcharging and withholding valuable market insights.
  • This hoarding of strategic information has led to the company not being able to properly forecast demand and supply for their different products.
  • Plagued with overstocking of some products while other demanding products suffered from stockouts which led the consumers to company’s competitor’s.
  • The company is looking to reduce the warehousing coststo achieve the target of 20% reduction in Supply Chain  costs by FY20xx.

Uncovering the Challenges: An Analysis of Initial Diagnostics in a Company

methodology of supply chain management
  • Currently , the Company is heavily reliant on their 3PL Service provider for Warehousing and inventory.
  • One of the primary problems associated with having a 3PL service is that they don’t integrate well with companies’ value and process. In this case the 3PL service provider withholds valuable information through which the company can schedule production of different products.
  • With the company being kept in the dark about storage and inventory the 3PL service provider often overcharge for their services. With the company operating in Australia , New Zealand and Asian markets these overcharges quickly add up to astronomical amounts which eats-up company’s profits.

Uncovering Hidden Challenges: A Deep Dive Investigation into an Unidentified Company's Problems

In Your Business Strategy
  • With the over dependency on the 3PL service provider, proper SCM planning was not adequate and the company was facing trouble with being overcharged by their 3PL service provider.
  • One of the biggest problems the company faced was overstocking in warehouses. The company has 122 storing locations in Australia. Out of those 122 storage locations, 63 storage locations have inventory more than $xxx Million. This overstocking of products led to multiple products suffer from stockouts.
  • The company primarily deals in Food and Industrial products, as such the over stocking of food may results in spoilage and the inventory have to be disposed off which eats up profits.
  • All of these above-mentioned problems can be mitigated if the 3PL service provider shared key data with the company which they do not. The supply chain costs were too high and the Client personnel (the company) were in dark about many of the charges.
  • Overstocking the inventories will lead to higher cost of storage. More storage units to be purchased/rented, more utility bills, more tools.
  • The company is looking to save costs in areas of supply chain such as sea transportation, land transportation, warehousing and value added activities.
  • The company being a top 3 player in market, they cannot afford to stay competitive with other with such overcharges from their 3PL service providers.
  • To recuperate these overhead costs the company transfers these costs to their consumers, which make their products costs more than their competitors. The company is looking to significantly reduce their warehousing cost to achieve 20% reduction in supply chain costs by FY20xx.

The landscape of Food and Industrial Products were heading to a new direction.

  • The foundations of food product industry are proper storage, fast and safe sea/road transportation, and affordability.
  • Over stocking food products will lead to wastage in form of spoilage. The market trend is positive as in the demand is growing for food products.
  • Industrial products demand proper storage and careful transportation. Any increase in overhead costs in SCM will reflect deeply on the revenue and profitability of the company.
  • Constant stockout may form a negative image of the company in consumers perspective. Which may force their hand to buy from the competitor.
  • An industrial push to adopt proper warehousing is to be expected in Food and Industrial products.

Who benefited from not solving the problem. What benefit did they derive?

Exploitation of clients by overcharging and underperforming 3PL service providers

  • The current 3PL serice provider gets to overcharge their client and simultaneously underperform in their duties.
  • The 3PL service provider and the competitors are benefiting the most.

The consumers were exploring their options

Meaning the company’s poorly made bottom end caused them valuable consumers

  • The prices of food and industrial products increased which results in low consumer satisfaction.
  • A permanent lowering of the SCM cost base was necessary and expected.

Profit-Eroding Factors: Uncovering Unrealized Problems in a Company

Optimizing Supply Chain for Perishable Food Products in Australia through Distribution to New Zealand

  • the supply chain model was outdated, they rely on large number of storage locations.
  • Distribute some warehouse locations to New Zealand and Asia.
  • Australia is more of a final destination for shipping routes, so shipping via sea is a bit more expensive.
  • More focus on air transport as food products are perishable in nature.

KEY PROBLEMS IN THE SUPPLY CHAIN AND OTHER DEPARTMENTS

  • How was warehousing impacting other aspects of the supply chain?
  • What were the root causes of the problem?
  • 3pl Service providers – how to deal with them?
  • Which problems to fix and which can be solved by changing certain partners in the flow of supply chain?
  • Which part of supply chain largely dictates the company’s problem?
  • What solutions will fix the problems?
  • Should you delegate to a 3PL service provider.
Global Supply Chain Group - Animated PC

Profit-Eroding Factors: Uncovering Unrealized Problems in a Company

Looking deeper into the problem

  • the supply chain model was outdated, they rely on large number of storage locations.
  • Distribute some warehouse locations to New Zealand and Asia.
  • Australia is more of a final destination for shipping routes, so shipping via sea is a bit more expensive.
  • More focus on air transport as food products are perishable in nature.

Overcoming Complexities: An Analysis of Complicating Factors in Solving Business Problems

  • The 3PL service provider withheld strategic information. This information could be used by the company to plan a proper demand supply forecast.
  • The 3PL Service provider also doesn’t share details of why they overcharge our client. A total de-briefing of different chargeable in bill needs undertaking.
  • A combination of domestic and international supply chains opened doors for a more complicated supply chain
  • The company often suffers from over stocking and understocking.

Prioritizing Solutions: A Guide to Choosing Which Business Problems to Tackle First

How long would it take to solve the problem by themselves without our intervention

  • In the best-case alternate scenario, the company and 3PL service provider reconcile their relationship.
  • The 3PL service provider shares the valuable information with the company and this will optimize their business in long run.
  • The 3PL service provider maintains proper inventory and eliminates overstocking and understocking.

 

All these actions will save cost and the client can remain competitive in the market for long.

Vivek Sood

The solutions had to be tailor made

not much room for trial and error. Proposing our plan to tackle this problem at the root level.

  • An alternate model of distribution was proposed. By reducing the number of warehouses, the company was able to switch to a new cleaner mode of distribution.
  • The two-tier distribution model was suggested. In this model, the client sells to distributors that provide products to channel partners, which, in turn, package products for the end customer.
  • With this model the client will save drastically on distribution costs and won’t have deal with the 3PL service provider.
  • Another model of SCM was proposed, a hybrid model.Hybrid channels combine the characteristics of direct and indirect distribution channels. We suggested the client to uses both direct and indirect methods.
  • We proposed getting a new 3PL service provider
  • Implementation of advanced inventory storage softwares which is SaaS based.
  • Reduction of warehouses in Australia and spread them across Asia and New Zealand.
  • We proposed air transport for more frequent and perishable food products.
Sunk Cost Strategy -Disregard When Assessing Projects

Unlocking Insights: A 60-Month Analysis of Supply Chain Data

In depth analysis with actual data was the key

  • Each consumer/B2B data and stock transfer for a period of 60 months before the year of modelling was collected via the ERP system .
  • For accurate forecasting and demand planning. The collected data had to be sorted and cleaned for better analysis.
  • Getting Data from 3PL service provider was the key to the puzzle. Adding this data to the mix gave us a cleaner picture regarding warehousing and distribution.

Timeframe in conducting in depth analysis of data

  • It took 8 day to conduct the preliminary analysis,
  • 5 weeks to conduct the additional analysis
  • 3 weeks each to simulate effects of different supply chain models
  • 2 weeks to get approval from board.

Finding Solutions: An Analysis of How Re-tuning and Re-balancing Can Solve Supply Chain Issues

  • After our data analysis, we decided certain key points in SCM where the costs could be greatly reduced.

These areas were

  • Sea transportation,
  • Land transportation,
  • Warehousing
  • Value adding activities.

Uncovering Weaknesses: The Importance of a Deep Analysis in Identifying Vulnerabilities

  • The cost-effective scenarios were not evident without the analysis.
  • Without the analysis we couldn’t find points in supply chain to optimize the costs.
  • To understand the effectiveness of the new model and to select the best alternative model with the minimal cost and a robust supply chain model -all the analysis was necessary.

The result shows a reduction of 20% in Supply chain costs

  • The results of the analysis clearly showed an overall cost reduction of 20%and better warehousing model.
  • The distribution network was greatly improved. With the investment of $126k to this project , our client showed returns of  $2.65 M.

We tackled all objectives

  • 15% in Sea transportation
  • 15% in Land transportation
  • 30% in warehousing
  • 10% in value adding activities
  • In total the client saved $20.7 M, compared to their FY2005. Out of which $10.1 was from implementing better warehousing alone.

KEY LESSONS FROM THIS PROJECT

Here is a list of things we learned from our endeavor

  • Do not blindly trust the business process of 3PL Service providers. Do your own due diligence.
  • Small changes here and there ca cause a big difference at the bottom end of the company.
  • All companies need a better, simpler and more accurate ERP systems. A large chunk of ERP data is simply not useable
  • Testing the raw data from ERP is a must.
  • When operating internationally it’s better to have multiple partners managing your inventory, distribution and transportations.
  • The hybrid model of supply chain can be across industries which are high margin, high volume in nature.

gET INTO TOUCH