SCE Helps a Leading Chemical Company Improve Their Transportation Costs
A large Chemical company, manufacturing products for Industrial, pharmaceutical, personal care and many other industries, sought help in lowering freight costs
and improving their warehouse network
The subject company creates and sells innovative, sustainable, high performance specialty chemicals for industrial and consumer use across the globe. SCE’s engagement dealt with their North American operations.
During SCE’s Rapid Assessment Process, it was determined that the subject company had fallen behind in its Strategic Supply Chain Management practices due to a lack of resources and the company focus on top-line revenue (“Sales at all cost”), rather than a “best cost/best service” approach. The company had not conducted a Transportation Request for Proposal (RFP) in seven years, and had not done a formal analysis of its warehouse network in over ten years.
Although 75% of their outbound shipments are paid for by customers, the remaining outbound freight, as well as a significant volume of transfers to the different warehouses in their network, amounted to a significant freight spend, which was increasing at an alarming rate.
SCE decided to develop RFPs for three different modes of transportation; Less-than-Truckload (LTL), Full Truckload (FTL), and International freight (both import and export). SCE also performed an analysis of the current warehouse network to determine current cost, as well as to identify options to improve the network from both a cost and service perspective.
SCE constructed comprehensive RFP formats, unique to the company, drawing on SCE’s experience in conducting successful RFPs. SCE selected a mix of potential providers to participate in the RFPs. For the LTL and TL RFPs, the carriers comprised a selection of national and regional carriers that could service the warehouse network and the customer base effectively. For the International RFP, SCE selected freight forwarders that had experience importing and exporting from and to the countries most
used by the company.
The combined results of the RFPs amounted to over $1.5 Million in annual freight savings, and also provided a mix of incumbent and new, high-performing providers in an industry environment where prices were increasing for many by double-digit percentages.
The warehouse network study provided a detailed analysis of all the current lanes and operating costs associated with each, as well as benchmarks for future savings opportunities. Additionally, SCE provided an analysis for reducing the number of warehouses in the network, and recommended relocating the warehouse servicing the Western Region of the US in order to lower both freight and operating costs, improving the reach of the network.
In order to create a platform for continuous improvement, SCE also facilitated the introduction of an outsourced Transportation Management System (TMS), and replacement of the current Freight Audit and Payment system to a third party that includes best practice reporting and features.