Case Study: Establishing a
nominated day delivery service
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
Paragon, 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.
