Case Study: Assessing an
automotive parts supply service
We helped the UK distributor of an
overseas automotive manufacturer to develop a logistics strategy for
serving the after-market. Spare parts for cars were being distributed to
dealerships throughout the UK. Every dealer received a stock order every
two weeks and stock orders were delivered using a dedicated fleet of 14
articulated vehicles. A separate VOR service was in place and a premium
price was charged. Dealers could order up until 16:00 for next day
delivery, normally during the morning. Despite the premium, 97% of
dealers were using the VOR service every day. We worked with the
distributor's team to investigate the effects of an improved delivery
service.
The first stage was to set up a model of the existing transport
operations in Paragon. During this part of the project, it was found
that the stock order deliveries could be performed with 2 less
articulated vehicles but the VOR delivery fleet was being well utilised.
Various options to increase the level of service to dealers were then
investigated with the client assessing the impact on distribution centre
and dealer costs.
The conclusion of the study was that stock orders and VOR orders should
be delivered using the same fleet. No limit would be placed on the
frequency of delivery of stock orders. However, to ensure that the
distribution centre costs incurred assembling them were not excessive,
they would have to exceed a minimum value and 48 hours notice would be
required. VOR service would continue without alteration. Calculations
indicated that the small increase in transport costs resulting from this
change would be greatly exceeded by the reduction in inventory costs for
dealers. Furthermore, working capital would be released in the
dealerships.
