Case Study: Supply Chain Strategy for a Cold Storage and Distribution Company

Focusing on Warehouse Operations and Transportation in Developing a New Supply Chain

Case Study: Supply Chain Strategy for a Cold Storage and Distribution Company

Focusing on Warehouse Operations and Transportation in Developing a New Supply Chain Strategy

A leading cold storage and distribution company with significant operations in Bangalore approached Martins Consulting to refine its supply chain strategy. The company sought to reduce costs while improving operational efficiency in its temperature-controlled warehouse and transportation network, which were key components of its supply chain.

The initial phase of the project focused on understanding how the company’s supply chain costs compared to its competitors within the cold storage and logistics industry. The goal was to identify the areas with the greatest opportunities for improvement and cost reduction, specifically looking at warehousing and transportation.

Benchmarking and Data Collection

Martins Consulting developed a detailed benchmarking initiative to compare the client’s supply chain costs by key components, including warehousing, transportation, inventory management, and handling processes. Cost data was collected from a selected group of competitors in the cold storage and distribution sector, representing a significant portion of the market share in the region. The data covered key metrics such as warehouse space utilization, transportation spend, delivery lead times, and packaging costs.

Through this analysis, it became evident that transportation was the largest area of spend, followed closely by warehousing costs. Additionally, transportation expenses were found to be higher than those of their direct competitors, signaling inefficiencies in the transportation network that needed to be addressed.

Analysis and Opportunities for Improvement

Following the benchmarking phase, Martins Consulting conducted an in-depth analysis of the client’s transportation network. Extensive data was gathered on key variables, including shipment modes, routes, delivery requirements, carrier performance, and the tendering process. Key observations included:

• High Carrier Costs: The company was using a fragmented carrier network, with no central strategy for negotiating rates or optimizing routes.
• Transportation Inefficiencies: There were opportunities to consolidate shipments and optimize routes to reduce deadhead miles (empty miles) and improve load efficiency.
• Packaging and Handling: Suboptimal packaging practices led to higher transportation costs and increased claims, impacting both operational costs and customer satisfaction.

Strategic Recommendations

Martins Consulting developed several strategic recommendations to reduce costs and improve performance across the supply chain. These recommendations focused on the transportation network, packaging optimization, and warehouse layout.

1. Transportation Optimization

• Carrier Consolidation and Negotiations:
  Martins Consulting identified opportunities to consolidate the company’s carrier base and negotiate more favorable rates. By working closely with the client’s transportation team, they established clear targets for reducing rates, fuel surcharges, and improving delivery performance.
  The carrier negotiation strategy aimed to reduce transportation spend by at least 10 to 12 percent, achieved through better rate negotiations, optimizing fuel surcharges, and reducing the number of carriers used.
• Route Optimization and Shipment Consolidation:
  The team recommended implementing route optimization software and consolidating shipments to reduce transportation costs. By consolidating shipments into fewer deliveries and optimizing the most efficient routes, Martins Consulting helped reduce transportation costs associated with excess mileage and fuel consumption.

2. Packaging and Handling Optimization

• Product Packaging Improvements:
  One of the key recommendations was to redesign the packaging for temperature-sensitive products to improve handling and reduce shipping claims. By enhancing packaging materials and processes, the company could minimize damage during transit, which would also lower carrier claims and improve customer service levels.
• Labeling and Tendering Process Enhancements:
  The team also recommended changes to the labeling and tendering processes, which would simplify the shipping process and reduce errors. Clearer documentation and labeling standards would reduce the number of misrouted products and the associated claims, ensuring a smoother operation from warehouse to customer.

3. Warehouse Optimization and Network Reconfiguration

• Reconfiguration of Storage and Distribution Network:
  In order to improve efficiency and reduce both warehousing and transportation costs, Martins Consulting recommended reconfiguring the company’s warehouse and distribution network. This included identifying optimal locations for new distribution centers to consolidate inventory closer to key customer locations, reducing transportation costs and improving delivery lead times.
• Warehouse Layout Optimization:
  The warehouse layout was restructured to improve material flow, reduce congestion, and enhance product handling. By streamlining processes within the warehouse and automating some handling tasks, Martins Consulting helped the client improve space utilization and reduce labor costs in the cold storage environment.

Results and Benefits

By implementing these strategies, Martins Consulting successfully helped the cold storage and distribution company achieve the following:

• Transportation Spend Reduction: Through carrier consolidation, rate negotiations, and route optimization, transportation costs were reduced by 10 to 12 percent.
• Reduced Claims and Improved Customer Service: Improved packaging and handling led to a significant reduction in carrier claims and enhanced overall service levels.
• Warehouse and Network Optimization: The warehouse layout improvements and network reconfiguration resulted in a 15 percent reduction in supply chain spend, while also improving storage capacity and reducing order fulfillment times.
• Improved Delivery Performance: Optimized transportation routes and shipment consolidation improved delivery reliability, leading to a higher level of customer satisfaction.

Conclusion

Martins Consulting’s comprehensive approach to supply chain strategy helped the cold storage and distribution company achieve significant cost savings while improving operational efficiency. The transportation spend was reduced, warehouse operations were streamlined, and packaging improvements led to better customer service and fewer claims. This case exemplifies how a targeted supply chain strategy, focusing on transportation and warehouse optimization, can lead to measurable improvements in both cost and performance in the cold storage and logistics industry.