Consolidation opportunities to drive down cost
As part of a head office initiative to optimise the Group’s Australian supply chain, our client required a review of its distribution network in Queensland and New South Wales.
There was a view that significant cost savings may result with the consolidation of some or all branches in the region into their main distribution centre in SEQ.
Qualitative and quantitative review
Prological assessed the viability of the proposed consolidation in three parts:
- The ability of the SEQ DC to absorb the operational activity in relation to site capacity, inbound and outbound material flow and MHE.
- The ability to meet the required customer service levels with transport solutions ex. Brisbane.
- The net cost reduction resulting from branch closures, labour consolidation and new transport arrangements.
Prological employed a range of methods to complete this assessment including:
- customer surveys
- customer and branch visits
- DC operations review detailed analysis and modelling of throughput data.
Achieving a balance between savings and service
Our analysis concluded that the consolidation of some branches would result in material cost savings without compromising service levels for most customers and product categories.
We highlighted that whilst material savings were accessible, some customers may perceive branch closures as a compromise to their service offering.
The results triggered much internal debate and drove the sales teams to commit to sales growth budgets that would deliver enough profit to offset the identified savings.
This work resulted in a sales-focused strategy to increase profits rather than attempting to deliver savings through a cost reduction programme.