Novus & Supply Chain Team Cut Costs, Boost Efficiency

Executive Summary

The partnership between a top 20 national convenience store operator’s supply chain team and Novus Consulting is an ongoing success story. Novus Consulting’s expertise in process optimization, project management, data management, and strategic planning is enabling the client to reduce DeadFreight, decrease last-mile shipping costs, and improve overall process efficiencies.

Problem

Our partner identified significant inefficiencies within their logistics supply chain after a decade of rapid growth and acquisitions.  The original pipeline of goods from factory toDistribution Centers was a direct line with minimal oversight and quality controls. The result was:

·     Dead Freight –A large percentage of shipments involved shipping containers that were partial loads; an expense with a material impact to the Income Statement when applied to hundreds (and soon to be thousands) of shipments annually.

·     Gaps in Quality Control –   the team had a functional quality control review while a product was being manufactured, but there were quality control issues that occurred after the functional review.  Shipments that were missing product, damaged during the packing process, or had the incorrect packaging wouldn’t be identified until it was delivered and unpacked at a Distribution Center.  The enhanced process facilitated additional quality control checks weeks or months before receipt at a DistributionCenter.  In turn, this gave the organization and their vendors additional time to address issues and ensure quality products were available to sell to customers.

·     Minimal Transparency or Visibility –There were a host of downstream logistical challenges, costs, and inefficiencies in notification and transparency regarding the shipment arrival process.

·     More Miles in Last-Mile Logistics – shipping containers direct from the factory arrived at one Distribution Center and then needed to be repacked and sent to the Distribution Center(s) where the goods were needed. [What’s the challenge here?}

Solution

Our partner’s rapid organic and inorganic growth over a short period of time had not given the Supply Chain team the time and space for consolidation; their focus had been on meeting the needs of the operation steams.  As a result, the 3^rd party logistics provider was unable to move forward with what they needed to resolve some of their pain points.

The Novus team was able to step in and identify the gaps between data flows and operational workflows. They worked to map the flow of data and goods from factory to distribution center.  This provided a comprehensive view for all Supply Chain (and Accounting) team members to understand how upstream activities impacted their respective work and how their activities impacted downstream activities. This understanding allowed the team to:

·     Refine internal business processes to improve handoffs and enhance communication across the organization

·     Develop data flows that aligned with workflows

·     Identified goals that could be achieved immediately and goals that needed to be part of subsequent phases

·     Build a strategic road map that could also expand efficiencies to all manufacturers and vendors

Results

The client’s Supply Chain team is well on their way to recognizing the efficiencies that they had expected:

·     The project is reducing Dead Freight, which directly reduces shipping costs on every order made.

·     Additional quality controls are available months in advance of the receipt of goods. Issues can be quickly addressed, often before the original shipment leaves the foreign port.

·     Transparency and visibility

o  Knowing when goods are received and all quality controls are met allows the accounting team to pay Net 30 instead of when goods are delivered at the port.  This ties up significantly less operating cash which saves costs as far away as in theTreasury department.

o  Knowing where goods are in transit improves forecasting.  The Distribution Centers know when shipments are arriving so they can staff accordingly.  A better understanding of lead times and where goods are in the process helps with new orders and optimizing order quantities.

o  Improved and actionable vendor scorecards.

·     Streamlining last-mile logistics

o  The third party logistics provider receives goods at the port of destination in the U.S. Goods are redistributed so that each Distribution Center receives only the goods that he respective Distribution Center needs.  This prevents extra shipments betweenDistribution Centers while further reducing Dead Freight.

o  Direct shipments from port to DistributionCenters further reduces the time from cutting a Purchase Order to GoodsReceipt.

·     Executing the Strategic Roadmap

o  With a Roadmap in hand, the Supply Chain team is able to prioritize additional efficiencies available with the 3^rd party provider based on estimated cost savings. Internally, the client can identify the pre-work needed to execute theStrategic Roadmap by addressing data gaps and areas where data workflows fail to accommodate business processes. Through the course of the project, enhanced collaboration across teams has also opened the door for additional opportunities to drive Supply Chain costs lower.

The expected results achieved were a direct reduction in shipping costs, a direct reduction in the time to ship goods, and improved visibility over the logistics pipeline.

However, the client is recognizing additional benefits that were not readily apparent when the project was kicked off:

·     Fewer transfers of goods means less miles on Interstates, Highways, and Byways.  This reduces the number of traffic accidents, insurance premiums, and risks associated when driving hundreds of thousands of additional miles across the United States and Canada.

·     The team has reduced forecasting volatility.  Fewer moving pieces means there are fewer opportunities for things to go wrong and for delays to occur.

·     Reducing the number of times goods need to be transferred between Distribution Centers substantially reduces the company’s carbon footprint.

·     Improved collaboration within the Supply Chain teams moving forward.

Conclusion

An experienced provider intimately familiar with the process, a willing client, and executive sponsorship is important, but a winning formula requires a project management team that can step in, understand pain points, understand gaps, and drive collaboration to address challenges.

Bringing in the right Project Management team not only brought the project to a successful conclusion, but it gave the Supply Chain team faith that their invested capital in the project was money well spent.  Our work has helped open the door for the Supply Chain team to collaborate on subsequent phases.

Novus has been a differentiator on multiple Supply Chain projects for our client because our team members bring an intimate understanding of data and the business.  We’re not just Project Managers, Business Consultants, and Data Consultants.  Most of our team members have over a decade of experience at companies like yours; working inAccounting, Finance, Operations, Supply Chain, and other areas before we stepped into the consulting space.  We know that, while concepts and principles may be universal, each company has its own unique culture, history, ways of doing business, and legacy that need to be factored into the solution so that everyone can be successful.

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