Supply chain modelling using world leading software

A large contract distribution company was reviewing its relationship with a multinational electronics operation. Benchmarking had shown that transport costs within the UK were higher than other EU countries. The service was being provided through a delivery network that was shared with other users. Delivery days were often allocated at the time orders were taken and, although in the past there had been attempts to co-ordinate delivery days, vehicles covered large areas every day. Furthermore, the contract distribution company had difficulty in identifying the costs of deliveries carried out on behalf of different customers. This had led to pricing structures that did not match the cost profile.

We were asked to assist in a review that had to identify the appropriate service level and large cost savings. A model was constructed which was able to identify handling costs, inter depot trunking costs and radial delivery costs for a number of service options. The model incorporated the Paragon route planning system, spreadsheets and specialist mapping software. It was used to identify the effect on the common delivery network of withdrawing the electronics company's business. At the same time, the effect of other changes, such as using a parcel carrier for small drops, were investigated.

The model enabled us to identify the effect of operating dedicated vehicles for the customer and to investigate the effects of different levels of service, different depots and different vehicle types. A thorough investigation of seasonality and future growth was also conducted.

The model proved that a nominated day delivery service would achieve sufficient density of coverage to make effective use of dedicated vehicles giving improved focus on service and costs. Paragon and special mapping software were then used to identify delivery days for every address and specify resources for each depot. The relationship was renewed and a 20% saving in transport costs was identified.