Case Study: Consumer Goods
This Beverage Company was in the market for a new 3PL to manage regional operations. All the client’s DCs were currently being managed by an existing 3PL on a month-to-month agreement, however the relationship was declining due to inadequate communications, excessive invoicing with many clerical irregularities, and overall reduced customer services. Their operations at one facility location had also been moved twice in the past two years due to capacity constraints and was reaching full capacity again. The client partnered with Miebach to find the optimal number of nodes for distribution to serve the expanding regional market while minimizing costs, and to identify a viable 3PL Service Provider who could manage all the warehousing and transportation needs for the client in this geographic area.
Center of Gravity Study Reveals Optimization Potentials
Miebach performed a center of gravity analysis for the client which demonstrated the need to consolidate the network into 3 nodes to streamline operations. The results indicated that their existing footprint was heavily concentrated in the main urban centers. The benefits of the greenfield analysis provided essential insights into the right balance between the number of DCs spread across the nation while finding the sweet spot in delivering optimal customer service. With the concentration of demand towards the main regions, it allowed the client to consolidate down to 3 DCs to guarantee service levels to all clients within those regions. Lastly through the analysis showed that the client can achieve the least impact on their cost of transportation for the last mile deliveries.
Finding the Right 3PL
A detailed tendering process was launched with a shortlisting of candidates based on calculated future requirements, cultural fit, and additional factors. Miebach oversaw the center of gravity analysis, future requirements & RFI execution, support RFP development, the tendering process, and the analysis & provider selection. Change management fundamentals were also deployed at the executive level to minimize resistance of change to a new partner.
Miebach’s support led to project success and increased customer satisfaction for the client. As the project manager, Miebach developed a high-level transition plan that the client could use as a baseline for smooth implementation and go-live success, as well as change management fundamentals to ensure stakeholders at all levels could remain aligned through comprehensive communications. Within the network, a three-node distribution model was recommended and implemented, resulting in a reduction in warehouse costs while enabling greater than 90% of shipments within a 2-day window, and enabled a decrease of ~$5 per 100lbs in the cost to serve category. Within warehousing, transportation, and drayage management the client selected from 15 suppliers to 3 viable candidates, and the client agreed with Miebach’s analysis and recommendation for the new 3PL service provider. The analysis indicated a 20-30% potential efficiency gain in warehousing costs. Furthermore, additional savings were possible in reduction from current drayage costs per container with the new service provider, who also manages their own asset-based fleet. Upgrades in technologies were also implemented, including new visibility through a TMS to manage outbound freight.