Business Logistics was contracted by a manufacturing company to evaluate its use of express services. The client was interested in reducing the cost associated with these services, which had grown substantially over recent years. It was clear that something had to be done.
Our primary focus was to review the client’s current contracts with the parcel and express companies it used. We evaluated services and rates, and then conducted a cost benchmarking process whereby we compared the client’s rates to those of other companies using similar services within the same general geographic areas. The objective of this analysis was to identify whether or not savings might be achieved as a result of re-negotiating the client’s contracts with these companies. The cost benchmarking process did reveal that a major savings opportunity presented itself by renegotiating contracts with the client’s service providers.
Our secondary focus was aimed at the client’s internal policies regarding the use of express services, and we found that no such policy existed. Business Logistics services conducted a survey that included client employees at various locations and determined that “priority overnight” service was used as a default whenever using express services. This service level was selected over 82% of the time, regardless of whether or not the recipient of each parcel was available to receive and act on the delivered material immediately upon receipt.
We renegotiated the client’s contracts and achieved a savings of over 12% resulting from reduced shipment rates alone. We also developed an express shipment use policy for the client that dramatically reduced the usage of “priority overnight” service, resulting in a savings of over 38%. Combined savings for this client exceeded $650,000 annually.