Short Case: Aborn & Co. works for Japanese Multinational Consumer Goods company to reduce transportation costs by $30M
Situation: Headquartered in San Diego, the client is a leading provider of consumer audio/video electronics and information technology products for the consumer and professional markets. Operations include research and development, engineering, sales, marketing, distribution and customer service.
Challenge: As the consumer electronics market saw increasing price competition and margin compression, the client was left looking at ways to lower internal costs as a means to recoup lost profitability. The client reached out to Aborn & Co. with a goal to reduce their U.S. logistics expense while maintaining or improving service to their highly prized customers. The company's biggest customers (Wal-Mart, Target, Best Buy) are quite demanding in that they often only allow their suppliers to use approved carriers, and have many unique chargebacks. Their major retailers also would not tolerate any slippage in service regardless of the savings it would generate.
Additionally, the client was operating a large private fleet to manage both inbound and outbound deliveries. In order to reduce empty miles and improve profitability, they had begun brokering space on their private fleet.
Process: In order to fully understand the intricacies of the client's transportation and logistics operations, it was necessary to travel to their U.S. distribution centers and interview employees to determine how freight was tendered to carriers, what service information was collected, what constraints the the operations team had to work within (customer requirements, team goals, etc.), and how they managed and paid for their internal fleet. Aborn & Company also performed a review of the standing rates and contracts with both TL and LTL carriers. Further, the client shipped a tremendous amount of high value product that was susceptible to theft. Aborn conducted a study into all over, short, and damage problems the client had with carriers.
During the course of this assignment it became evident that the company could operate more efficiently with fewer distribution centers and a significantly reduced private fleet. Months after the start of the project, with Aborn & Co. managing the transition, the client closed the pinpointed DCs and service levels did not fluctuate.
The next step was to interview the client's legal department to understand the language in their contracts with both existing and new third-party carriers. By revising the contracts, Aborn & Co. was able to negotiate better rates while mitigating liability in instances of claims.
Working with the client's logistics staff, we put together a list of carriers acceptable to the client and disseminated an RFP to the pre-selected carrier community. As part of the negotiation process, Aborn & Co. traveled to the corporate offices of the client's long term, significant revenue carriers in an effort to inform and align the carriers with the new transportation strategy.
Result: At the conclusion of our work we presented a review for the client detailing the savings generated by renegotiating the carrier pricing and closing unnecessary distribution centers. While we had projected a $27 million dollar saving, in the first year, by the client's own estimate, the savings are projected to be in excess of $30 million dollars.
