Service - Based Demand Chain Reengineering
Challenges & Objectives
Remove cost from a complex and geographically dispersed demand chain while maintaining required levels of customer satisfaction.
Strategy
Implement a three (3) phase initiative consisting of: Phase I - Transportation Cost Containment, Phase II - Transportation Optimization and Phase III - Extended Enterprise Demand Chain Initiatives
Customized Solution
Working closely with the client's key logistics managers, a model was created that focused on forecasting through to order fulfillment, identifying six major pressure points that generate costs and impact customer service. Within the model, fourteen distinct cost drivers revealed other potential performance restraints.
The company is the worldwide leader in end to end networking solutions for the Internet. Their networking solutions connect people, computing devices and computer networks, allowing users to access or transfer information without regard to differences in time, place or type of computer system.
The company maintains a sourcing base of proprietary and contract manufacturing facilities in Asia, North America, and Europe, from which it services clients worldwide.
Working from this end-to-end demand chain model, we classified the opportunities for cost effective improvements into three phases.
The first phase, Transportation Cost Containment addressed transactional issues. We focused on immediate cost improvement opportunities that included:
- Redesign and rerouting of telecommunications for logistics data
- Changes in regional freight consolidation and distribution patterns
- Administrative improvements
- Transportation rate negotiations
The second phase, Transportation Optimization, addressed tactical issues. We focused on service level selection and the associated savings that could be realized by moving from standard to deferred shipments with appropriate adjustments in the level and placement of inventory. Bar coding was applied to reduce or eliminate double handling of product by evaluating alternative routing based on shipment promise date and destination.
The third phase includes a number of strategic supply chain initiatives that address improvements in:
- Forecasting
- Purchasing
- Manufacturing
- Packaging
- Cargo Insurance
The Results speak for themselves. This solution increased customer demand for the product slowed down development costs and increased supply chain visibility and subsequent performance.
Customer satisfaction through online order placement and service improved 25% over the past year. They were able to realize a 35% cost reduction in inventory levels throughout the supply chain.
Results
Annual savings from Phase I are projected at $2.6 million. Those from Phase II are projected at $1.2 million. While these savings are substantial, it is expected that savings realized from the Phase III strategic initiatives will far eclipse those already achieved.
These cost benefits accrue to our client without compromising service levels. The reason? A holistic approach identifies all potential opportunities for improvement while ensuring that relevant trade-offs are considered prior to implementation. This balanced perspective ensures that the best possible value will be realized.