Manufacturing Supply Chain
Bus manufacturer required significant reduction in inbound transportation costs from third-party supplier.
- Reduce the third-party inbound transportation spend by 16% (by $1.8 million per year from the total spend of approximately $11 million).
- Exceeded the Driver Goal by 50%.
Implement Best Practices to Reduce Transportation Costs
A manufacturer of buses for public transportation, with plants in the United States and Canada and a third-party company that performs the inbound transportation for the majority of its assembly parts, believed there was significant opportunity to reduce inbound transportation costs, increase control over the inbound supply chain, and increase service level by reducing the cycle time from supplier to manufacturing facility. These actions would enable a reduction in inventory from 8.5 days of supply to 5.5 days of inventory stock.
The team verified the Driver Goal and identified the barriers that needed to be overcome to achieve it. Some of barriers the team identified and targeted for correction action included:
- A long-standing relationship with the third-party supplier, who worked diligently to make sure the client got all their parts, was reactive – not proactive – thereby driving costs up.
- A lack of policy rules allowed suppliers to ship when and how often they wanted without penalty, and a lack of readily available data hampered the ability to plan the inbound transportation network.
- Lack of visibility and planning led to poor utilization of the external fleet. Portals were not being utilized by the suppliers to schedule their pick-ups.
- The Transportation organization concentrated on auditing invoices and other non-value-added activities versus transportation analysis and management.
- Obtained data from the third-party vendor, sanitized and analyzed it, and formatted the modes of shipping into various categories, which included Regional Routes, Over-The-Road pick-ups, Single Source/Intermodal and LTL and UPS. Determined the baseline costs, practices, truck utilization, routines and routes for each mode.
- Identified, through creative analysis and the application of best practices, the practices and routines necessary to achieve the Driver Goal. This was done for each mode across all three locations.
- Developed business rules that detailed the practices and changes that must occur within the company, the suppliers and the third-party transportation company. Developed an operational flow chart that details the data necessary, both input and output, to be entered into the portal to give all involved visibility for planning and the data necessary to plan.
- Developed a financial operating report.
Reduced inbound transportation spend by