Project Title: Reducing Logistical Costs for a Leading CPG Organization Using Data-Driven Insights
Challenge:
A well-known CPG company faced escalating logistics costs, with freight expenses exceeding industry standards as a percentage of sales. This growing burden, combined with declining revenues, highlighted the need for a data-driven strategy to optimize logistics spend without sacrificing operational efficiency.
Approach:
We analyzed the client’s logistics network, leveraged shipment data from multiple carriers, and order management plus sales data from their ERP system. Our goal was to identify inefficiencies and trends to drive actionable improvements.
Key Discovery:
Our in-depth analysis revealed three critical areas for improvement:
- Customer Ordering Patterns & Order Size: The company’s acquisitions led to many small legacy accounts with frequent, low-quantity orders, driving up freight costs. We identified that minimum order quantities were not set effectively.
- Rate Auditing & Benchmarking: The client had not conducted a freight audit in over three years, and some carriers operated without contracts, leading to unchecked rate increases and excessive freight costs.
- Internal Transfers Review: The acquisition of new brands added warehouse locations, significantly increasing internal transfers of inventory. However, no recent review of these transfers was conducted, leaving inbound freight costs unchecked.
Solution:
We recommended strategic changes, including:
- Consolidating shipments to reduce frequency.
- Implementing a freight rate auditing process.
- Establishing and renegotiating carrier contracts.
- Optimizing inventory levels across warehouse locations.
Impact:
Our approach led to a 12% reduction in transportation costs, significantly improving the client’s logistics efficiency and overall profitability.