Transport Management Review: Savings and Organizational Improvements

The Problem

The customer company produces and distributes customized plastic products for packaging. It operates with a MTO (Make to Order) production model. In recent years, the company has had a very strong growth both in terms of volumes and customers. Shipments exceed several thousand per year; the customers are more than one thousand, most of them abroad. Foreign transport is mainly by road and, a minor part, by sea. Although the company has an ERP system, in the Supply Chain it mainly uses Office-type systems.

The company has recently found:

• • an increase in the incidence of distribution costs.
  • a high and growing level of inefficiency in the management of the order fulfillment process for foreign customer orders, involving multiple areas such as Customer Service, Production and Storage Planning and Shipment Office. In particular, the following:
  • • • An abnormal concentration of shipments in the last days of the week (Thursday and Friday), which results in peaks of work both in the warehouse and in the Shipping Office.
      • High entropy generated by unstructured communications between the various departments involved.
      • Order and shipment data updated only once a week.

Objectives of the Interim Management intervention

An interim supply chain management intervention is configured to review the operational procedures in logistics, making the current process of fulfilling foreign customer orders more structured and solid, and to identify possible areas of savings.
Change actions taken:

• • • Revision of existing transport contracts (rates and conditions):
      • Preparation of a tender for foreign transport (Tender).
      • Revision of the list of carriers involved in spot auctions/requests.
    • Revision of the shipping schedule, with distribution of shipments on every day of the week and not only on Friday (or Thursday).
    • Development of an organisational procedure for the management of the fulfillment of foreign customer orders.
    • Implementation in the company ERP system of new functionalities for the management of the processing of foreign customer orders; this system will be fully integrated and updated in real time.

Results

• • • In a few months of the intervention of the temporary manager, the tender activity and the review of transporters have been completed. The results obtained are as follows:
      • An 8% saving on the cost of foreign transport.
      • A reduction in the number of carriers used in Groupage from 12 to 3.
      • A reduction in the number of annual invoices for transport services from almost 1,000 to around 100.
      • Reduction of the volumes shipped on Thursdays and Fridays from 85% to 59% of the total volumes of the week, with the following benefits: reduction of working peaks in the warehouse and Shipment Office, reduction of overtime, reduction of waiting times for carriers at loading, reduction of peak stock in the warehouse.
    • The implementation of new functionalities in the ERP system, along with the activation of the new organisational procedure, which has provided for “frozen periods” and predefined rules in the relations between Customer Service and Shipment Office, with the following benefits:
      • Significant reduction of unstructured communications such as mail.
      • Information is the same and aligned for all functions, updated in real time on:
        • Changes to customer orders.
        • Production.
        • Shipments.
      • Availability of reports directly from the ERP system, resulting in greater ease in monitoring company transport costs.