Case Study:
Network Study/Client Retention

Leading Logistics Service Provider

Overview and Challenge

Tompkins Associates was retained by a leading logistics services provider (LSP) to develop a distribution strategy for one of its primary clients – an agricultural and construction equipment manufacturer.

The challenge was to optimize the supply chain network and reduce costs to create a “win-win” solution for both the LSP and its client, taking into account that the client-LSP relationship has existed for nearly 20 years.

No formal optimization and supply chain network review had been conducted in many years, and the network had spun itself into a web of various lanes, modes, carriers, cross-docks, service levels and costs. Even though it worked well, transportation was very inflexible, opaque, people-dependent and expensive.

To optimize the overall supply chain, the study focused on the manufacturing client’s current network and North American facilities. The client’s supply chain involved more than 4,500 dealers being serviced from 16 depots located throughout the U.S. and Canada. The LSP managed northbound (U.S. to Canada), southbound and intra-Canada transportation aspects, as well as several cross-dock facilities, at an estimated revenue of about $12 million.

Solution

Tompkins worked with the LSP and its client to validate an existing network optimization model against current baseline cross-dock locations and distribution points, transportation processes, costs and performance by lane and mode, current and future volume growth, service level expectations, and many other applicable constraints.

A detailed sensitivity analysis of the distribution strategy provided a deeper understanding of various alternatives to all of the supply chain partners. Tompkins recommended an integrated approach with a redefined logistics service agreement and transportation pricing.

The solution recommended by Tompkins included:

• Transaction-level visibility through IT systems implementation;
• Tactical transportation initiatives toward line haul consolidations;
• Zone skipping;
• Back haul opportunities;
• Leveraging freight buy;
• Consolidating last-mile deliveries.

For the next phase of the project, the LSP asked Tompkins to develop a multi-modal transportation pricing matrix for the same agricultural and construction equipment manufacturer. The pricing needed to incorporate flexibility so that either lane-level transportation rates or freight rates by each segment could be applied. Tompkins designed a pricing matrix to ensure savings for the client as well as for the LSP.

The Results

The LSP was able to prepare a rate proposal that would enable them to retain a valuable client and open up the possibilities for expanded services.