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In the Fast Lane:

Supply Chain Edge Helps a Laboratory Services Company Rapidly Boost the Value of its Supply Chain
  • A growing provider of pathology and diagnostic laboratory services found its logistics expenses had become unsustainable.

  • SCE helped the company divest its in-house fleet, consolidate its transportation providers, and reduce the costs of its distribution processes.

  • The company now is saving approximately $170,000 each month on transportation and logistics while delivering excellent customer service.

 

When patients’ lives are on the line, every second counts. This is especially true for a company focused on quickly and accurately performing lab tests on patient samples and getting the resulting reports back to doctors.

To compete against much bigger companies, this growing laboratory services company had developed an extensive outside sales force that used local courier businesses to facilitate the shipment of samples from doctors’ offices to the company’s lab via FedEx and UPS. The company also maintained an in-house courier fleet and fleet management staff to service accounts close its New York headquarters. While these efforts resulted in fast response times and enabled the company to compete with much larger firms, they contributed to logistics costs accounting for nearly 10 percent of the firm’s revenue.

The company hired SCE to find ways to reduce its logistics spend while maintaining high levels of customer service. After studying the company’s operations, SCE discovered several factors responsible for the company’s inefficiencies and high costs. For instance, despite being able to send reports to doctors electronically, many salespeople sent hard copies via FedEx. Furthermore, the company had not been utilizing courier services as effectively as possible. It was common for local couriers to transport packages from a doctor’s office to a FedEx location, even though the company could have used FedEx to cover that leg of the journey more cost-effectively. And in some instances, the company was paying couriers to visit doctors’ offices even when the office had no samples to send. 

SCE also found the company was not running its in-house fleet as efficiently or effectively as possible, which was adding to its overall costs. SCE’s analysis revealed the company stood to save more than $1 million dollars a year by outsourcing its fleet and fleet management staff and focusing on its core competency: fast and accurate lab operations.

Working with the company’s management team, SCE helped the company address these issues by divesting the company’s in-house courier fleet and staff; rationalizing the company’s large pool of couriers into a smaller group of the best available providers; replacing overnight shipping of hard copies with electronic distribution whenever feasible; and creating new processes for sample pick-ups that minimized unnecessary visits by couriers to doctors’ offices.   

These changes have had a dramatic impact on the company’s bottom line.  In total, the company now is saving approximately $170,000 each month on transportation and logistics, or more than $2 million annually—all while maintaining excellent service and rapid turnaround times for its customers.

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