Case Study:
Distribution Network Study
Leading Logistics Service Provider

Overview and Challenge

A leading logistics service provider (LSP) saw that its contract was close to renewal for its largest client -- a global manufacturer and marketer of power tools and accessories, hardware and home improvement products, and technology-based fastening systems.

With the contract renewal looming, the LSP realized that it was time to optimize the distribution network for the client and called upon Tompkins Associates (Tompkins) to help develop a low-cost logistics solution for the client.

Solution

During the project, Tompkins focused on identifying various cross-dock locations, cross-dock space requirements, transportation costs and impacts on transit times.

A detailed shipment and center of gravity analysis performed by Tompkins indicated that the best solution was to cross-dock in two western cities. Tompkins also conducted a transportation cost analysis. This analysis included multi-modal -- line-hauls, less than truckload (LTLs) and truckload -- ratings for inbound and outbound shipments.

The high-level, cross-dock cost model was integrated with the transportation cost assessment for the various supply chain segments, and each segment was highlighted with a cost-benefit analysis. This cost-model matrix was instrumental in selecting the optimal solution.

Additionally, a sensitivity analysis for transit-time was incorporated into the models to evaluate the impact on end-customer service levels. In doing so, the optimal cost solution proved to be the same as the optimal service solution.

The solution recommended by Tompkins included:

• Consolidating orders;
• Increasing use of truckload runs to reduce LTL traffic;
• Reducing line haul rates out of a U.S. distribution center (DC) and into one geographically accessible DC;
• Placing LTL distribution close to the majority of destinations needed.

The Results

With the changes implemented, the client has the opportunity to achieve an estimated annual transportation savings of 44%. Along with the savings, the client will see higher customer service levels. Overall the desired outcome will be achieved, and the LSP will be able to remain efficient and cost-competitive.