The higher capacity utilization of distribution assets and resourses the lower distribution cost per unit delivered will occur.
The Client Change Rationale
The company management has discovered that their direct distribution cost is relatively height compared with other similar distribution companies operating in the country.
The Company currently operates with 550 distribution trucks which are operated in from 28 distribution centers throughout the whole country.
Every local market has its uniqueness that drives the need for designing of various delivery services systems aimed to maximize the service levels at the lowest possible cost proposition.
Thus, at the time a truck is purchased a company gets affected by the fixed cost – it does not matter if the company utilizes the truck or not, the standing cost is set in motion anyway. The primary control point in distribution management is to understand that when a company operates a delivery truck a vast cost is allocated to the company’s distribution system. Every truck needs a driver and when adding a new truck it must be considered a long-term financial investment. This theoretically points out that operating with own fleet the majority of the delivery cost is fixed and it does not matter if the company uses the trucks or not. Therefore, the largest principal cost savings in distribution is, each time when it is possible to eliminate a need for a truck and a driver.
Assess the current situation and introduce effective and efficient change programs that lead to reduction in distribution cost for the company.
TPC-Consulting Core Modules and Content
- Delivery system economics
- Point of purchase sales and marketing strategy
- Infrastructure planning
- Distribution fundamentals
- Capacity utilization plan to improve distribution cost
- Measure and monitor key performances
Through planning and understanding the company managed to reduce their distribution cost by 18% the first year and then continually reducing cost and increasing efficiencies through continuous improvement programs.