CASE STUDY
Shaping a multi-year Cost Transformation for a 3PL services companyOur client is a US-based 3PL services company that provides fulfillment centre and last-mile delivery services within the retail industry. Their key focus lies on managing the complete operational flow of e-commerce orders for their clients: supply, storage, packaging & last-mile shipments. However, post-COVID restoration of transportation capacity is putting significant pricing pressure on 3PL players. Further, its US subsidiary has been recently acquired by a group with a global presence.
Strategic Context
Pricing pressure from clients after recovery of industry capacity post-COVID
Competitive environment with low overall profit margin & high pressure on cost
The client had been facing several challenges that hindered their manufacturing operations and prevented them from achieving their targeted sustainable throughput performance. These challenges included:
- 20+ facility centres with localized buying processes leading to differentiated specifications and business requirements for similar categories.
- Lack of data visibility leading to limited transparency on item/service-level purchases.
- Limited volumes leveraged to develop real partnership agreements with key suppliers.
Our objective was to install a professionalized procurement organization to ensure cost-consciousness and best practices at all times. While doing so, cost reduction initiatives were launched to realize direct EBITDA impact.
In collaboration with ASV Consult, the company kicked off their cost transformation journey from a procurement maturity assessment and future organizational design in order to launch cost reduction initiatives across multiple waves and categories. This meant ensuring direct EBITDA impact throughout the project, as well as an end-to-end professionalization of their procurement organization.
To address the presented challenges and achieve our objectives, we kicked off establishing:
- Design of future procurement operating model
- Dynamic spend dashboard
- Savings roadmap & execution
- Category strategy for 17 categories
The complete transformation program was fuelled by realized savings, gradually implementing the procurement organization to sustain the savings over time.
Procurement Operating Model
- Organizational design: E2E design of the target operating model with category management roles, incl. sizing, role descriptions & reporting lines.
- Centralized spend cube development: Development of dynamic and centralized procurement dashboard, incl. extensive data collection across all sites, spend classification, categorization & data cleaning.
Category Cost Reduction
- Savings roadmap: Detailed roadmap of savings initiatives across multiple waves with continuous balancing between the speed of impact and overall savings potential.
- Savings execution: Speed strategic sourcing initiatives across key categories (e.g., last-mile parcel shipment).
- Category strategy: Defined procurement category strategies for all categories, including internal analysis, market analysis, go-to-market approach and opportunity levers.