Identifying savings worth USD 4 million for a major home improvement retailer
Our customer is a leading home improvement retailer in the U.S. They currently have a staff of more than 340,000 and operate over 2,000 stores in all 50 US states, the District of Columbia, eight Canadian provinces and Mexico. Their goal was to reduce supply chain costs and facilitate growth in their import volumes. The roadblock to this was a high ratio (17.4%) of 20-foot light box utilisation.
The current situation led to higher supply chain costs at unit level and operational challenges at 3 levels:
- Less flexibility on purchase order (PO) cutting for small volume orders
- Increased use of 20-foot containers by individual carriers, leading to space constraints
- Reduced efficiency due to the number of containers loaded and unloaded at origin vendor and destination distribution centres
Based on our internal feasibility study, we arrived at the solution of reduction of the 20-foot container. This plan was initiated by the origin client development team in China. We projected an annual logistics cost saving of USD 4 million with this proposal.
We started by evaluating the possibility of combining 2x20-foot containers. In order to achieve this, we consolidated all feasible 20-foot containers according to the PO information and facilitated weekly communication with the vendors. In case the vendor was unable to consolidate by themselves, it was delivered to our Container Freight Station (CFS) facility for multi-vendor consolidation in close arrival windows.
Our operations team rolled out the project after a two-month trial run of our proposed logistics process. The roll out was successful thanks to a well-planned branch-by-branch schedule. Till date, the project has been running smoothly during every branch peak season.
The customer has executed the same 20-foot reduction programmeamong its other ten Chinese origins. More than 60% of planned 20-foot containers have been successfully converted into 40-foot containers and over 70% of these conversions were consolidated in our CFS facilities.
Successful implementation of this programmegenerated total savings of around USD 2.2 million for the home improvement retailer. The result of this project played a crucial role in the renewal of the customer’s 3-year contract with us.