Two LSP Case Studies: Supply Chain Network Study and Distribution Network Study

Client Success Story

Challenge: Work with LSP to optimize supply chain network for its existing client, and 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.

Two leading LSPs sought to optimize networks for their existing clients. In these case studies, read how Tompkins analyzed the networks for both LSPs and provided recommendations that benefited the LSPs and their clients.

Case Study:
Network Study/Client Retention
Client: Leading Logistics Service Provider

At A Glance

Challenge: Work with LSP to optimize supply chain network for its existing client

Solution:

  • Performed network analysis,
  • Created optimization strategy,
  • Helped redefine the logistics service agreement and transportation pricing

Overview and Challenge

Tompkins 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.

 

Case Study:
Distribution Network Study
Leading Logistics Service Provider

At A Glance

Challenge: Develop a low cost distribution network solution for an LSP’s existing client

Solution:

  • Performed analysis and created strategy to consolidate orders.
  • Increase use of truckload.
  • Reduce line haul rates and locate LTL distribution close to majority of destinations.

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 International (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.

 

 

 

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