Machinery manufacturers

Background

A is a machinery manufacturer that sought to export appliances to North America. They were forwarding the merchandise from Hong Kong to North America, then storing it in stock points in LA and Chicago, and shipping it across the region from there. They wanted to minimize the total expenditure of shipping products from Hong Kong to points throughout North America and thereby improve their competitiveness on the market.
Our team of experts analyzed their current distribution system and pinpointed congestion in the shipment routes from their stock points in North America. This led to the discovery that products were not being shipped from the optimal stock point, instead going out from other locations.

Proposals

The ultimate issue was growing costs associated with shipping goods from more inefficient stock points. Thus, the goal was set: building and rerouting an optimal logistics route in order to cut down on costs. We hypothesized that their primary logistics costs were 1) maritime transport (from Asia to North America), 2) storage fees at each stock point and 3) truck shipment costs (from the stock points to each destination), and that the combined total could be reduced. We then set about analyzing the data.

• Initiative 1: reduction of congestion
  Taking into account maritime freight costs from Hong Kong, we conducted a cost simulation to determine which stock point merchandise should ship from, depending on the destination state.
• Initiative 2: additional SP
  We forecasted the creation of a stock point in Atlanta in order to cope with shipments to the east and south, and conducted a simulation based on that.

Outcome

This initiative has contributed to a net savings of 5M USD, or 10% of total logistics fees. This is largely owed to the fact that shipping costs were reduced through proper SP shipping, and the increased cost of maritime freight from Hong Kong owing to the addition of the Atlanta stock point. On balance, the result was a net cost reduction.