Is it still possible to save money on transporting goods today, when wages and the price of diesel are constantly rising?

Client:

NCH ​​Corporation is a global manufacturer with 8,500 employees on six continents, specialising in maintenance chemicals, water treatment solutions, plumbing products, lubricants, biological products and parts washing systems. Our scope was Europe.

SCM – areas addressed in this article where real savings were achieved:

Small Parcel (SPF) – 12%

Standard ground transportation – 15%

Call:

Rising input costs, supply chain constraints and geopolitical uncertainty have led to an even greater focus on cost management across the company. NCH purchases large volumes of direct materials (chemicals, lubricants, etc.) globally and consumes significant quantities of containers, pallets, packaging and MRO (maintenance, repair and operations) materials in its manufacturing and distribution operations. The high volume of purchases combined with a diverse global supplier base presented a complex challenge – fully optimising supplier contracts. That’s why management approached ERA for help.

Solution:

NCH ​​engaged ERA Group to optimise supplier costs in selected cost categories in queue with ERA’s expertise. ERA Group implemented both the RFPs, but suppliers were also invited to propose innovative solutions to streamline cooperation with NCH. Our experts within the Czech Republic worked closely with NCH’s internal teams to evaluate alternatives and adjust the work of suppliers to maintain the required level of service throughout the process while achieving better pricing conditions.

Transport:

The transport of materials is quite diverse, with entire equipment/systems for cleaning and washing parts being transported to clients, as well as various chemicals, lubricants, biological products and spare parts for plumbing and installation for these cleaning systems. This also includes reverse logistics for returnable packaging, spare parts or entire cleaning systems. The company's scope is pan-European and customer service is provided in the north from Finland, Sweden, Norway to Spain and Italy in the south and from Ireland in the west to Turkey in the east. Within land transport, the optimisation of transport from palletised goods to full truckload shipments was addressed. The SPF (small package freight) section includes all parcel shipments with a volume smaller than a pallet.

Using follow-up activities, the team of analysts achieved savings in the SPF area of ​​12% , where the largest savings typically did not arise from a single measure, but from a combination of the right choice of carrier, packaging optimisation (this was also addressed by another project in the Packaging area - savings of 27%), disciplined service management in close cooperation between new/existing suppliers and the client's operational employees, as well as systematic work with data on planned and implemented shipments. The following selected steps also helped achieve savings in the SPF area, which the client had already set up well before starting cooperation with ERA Group:

• Transition from express services to “time-delayed” services (where the client’s customer tolerates it)
• Reduction in the number of packages per order
• Volumetric weight revision (source of hidden costs)
• Elimination of “premium” services without subsequent verification of whether they were actually implemented in the “premium” mode
• Introduction of approval for urgent shipments (need vs. profitability to the customer)

It is clear that these steps are individual and are connected to the specific needs of the client's customers, which needed to be identified in advance, and therefore the service adjusted directly to their expectations.

In the area of ​​Standard Land Transport (full truckload shipments, additional loading, groupage), an overall average saving of 15% was achieved, with no savings in some regions, in others in the range of 8-30%. It is no secret that today the tender itself often does not bring significant savings, because the market is very pressured, where fuel, capacities, wages are constantly growing. Real savings therefore arise primarily in operations, transport structure, planning, discipline in processes and work with data.

In the area of ​​more than pallet transport, the greatest savings were achieved by:

• consolidation (LTL → FTL philosophy),
• increased utilisation, especially in reverse logistics,
• elimination of ad hoc shipments (correct timing and rules for urgent requests)
• improvement of internal planning of preparing shipments for fixed outgoing times
• introduction of regularity in outbound transport operations

It is again necessary to mention that the implemented steps need to be "tailored" especially to the expectations of the client's customers, or to the internal processes of production, storage and other limiting factors. Thus, an individual approach is today one of the most effective ways to save money , if it is carried out systematically, without structure it often leads to chaos rather than improvement.

Our specialists strictly approach each client individually, however, cooperation from the client is essential, we will only achieve savings if everything is managed (common rules), as simple as possible (especially for both the operative and the client) and supported by data from the information system (mutual sharing).

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