Must Arrive By Delivery Date Dilemma: A BG Case Study

SCENARIO:

Tremendous growth leads to challenges related to the distribution of this rapidly expanding health and beauty products distributor. With much of their business moving toward “big box” retailers, the need for carrier management would be required to fulfill the commitments made to their clients. The true cost of doing business seemed more complex than fulfilling orders.

 

MUST ARRIVE BY DILEMMA (MABD):

With vendor scorecards dwindling, and charge backs against purchase orders mounting, the need for a better solution was apparent. From numerous carrier meetings, to drive on time compliance, to costly upgrades in service levels, the trend continued to show little improvement. Lead times were not an issue, and inventory levels were manageable, yet carriers could not seem to comply with the Must Arrive By Date (MABD) displayed on the BOL. Purchase orders were being shipped with ample lead time and in most cases, early with guaranteed service at a premium. Even with upgraded service, the carriers would refuse to refund the charges since they were delivered “on time”, per the standard transit. BlueGrace began by analyzing the data and scorecards to determine root cause of the issue, and set a baseline for current state performance. Next, an assessment of ERP integration capabilities was performed. Through minor customization, the potential for real-time connectivity to BlueShip TMS was an opportunity. This connection would allow BlueGrace to receive incoming orders from specific clients and apply custom business rules to achieve the Overall goal. No matter when the order was received, BlueShip would effectively route the “Best Value Carrier” AND provide the most optimal ship date. This meant that each order, once approved within the ERP, would be rated and routed; with a Wal-Mart approved carrier, at the lowest cost, with standard service and shipped on the day that would best fit that carrier’s network to allow for a delivery within the specified MABD window. Our client showed a 90% reduction in charge backs within the first 60 days of implementing this program. Combined with the dedicated support at BlueGrace proactively tracking each flagged order, the company received the best scorecard performance in recent history.

 

FREIGHT COST ALLOCATION:

The next phase consisted of reviewing what the true cost of each order was when freight cost was allocated. BlueGrace analyzed the average freight cost as a percentage of sale. This percentage was incorporated into the product cost to determine pricing to the end customer. BlueGrace knew there was opportunity to drill down and allocate a freight cost not only at the customer level, but the customer location, customer location type (Direct to Store or Distribution Center) all the way down to the SKU level. Since freight cost was not passed to the client, this would either show a net margin loss or show opportunities to reduce the freight cost allocation to become more competitive. The result highlighted regions that were more costly to ship to, products that did not have enough margin potential to validate shipping cost and insight into regions of the country that would benefit from an additional warehouse location.

Continued Growth:

BlueGrace provides scalability for growing companies to achieve their goals without labor or technology investments. Our expertise and processes provide our clients with the bandwidth to operate efficiently and drive direct cost eduction through our procurement and dedicated management.

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