YEAR
2019
Type of project
Transport
Savings
600K$
directed by
Afef bouguerra
Martin Nadon
Overview
Customer Presentation
Our client is one of the largest poultry cooperatives in Quebec. It is known for its local production and quality products.
Challenge
Considering the upcoming opening of a new distribution center and the centralization of its shipments, the client wanted to launch a transportation call for tenders, to optimize its network and analyze the impact of this change.
Client's goal
Through this call for tenders, the client’s objective was to reduce its costs and cover the volume shipped.
Execution of the project
Conseil 2.0 based its analysis on a year of historical data considering the upcoming changes (new distribution center) and the customer’s intent to centralize its distribution.
The historical data allowed us to define a baseline of $6 million CAD (historical cost). It permitted a comparative evaluation at the end of the project to determine the savings generated.
With that data, we also modelled the distribution network defining 164 lanes (origin-destination) and included different modes of transportation: Truckload (TL) and Less Than Truckload (LTL).
To answer this event, more than 140 carriers were invited to participate.
To consider the new distribution center, Conseil 2.0 created lanes to model the customer’s new reality.
The methodology proposed and adopted by the client was in 5 steps:
The objective of this phase was to evaluate the carriers invited to the event. A qualitative questionnaire was sent to them to find out if they met the criteria and requirements of the client. Only qualified carriers had access to the following steps.
All the qualified carriers in the RFI step were requested to provide rates for the lanes they were interested in. Conseil 2.0 ensured the validity of the bids received during round 1 and supported the communication with all the carriers throughout the event.
The objective of this step was to provide feedback to the carriers that participated in round 1. Conseil 2.0 informed them of their position compared to other participants and assisted them to correct potential errors in the bids. The feedback given to the carriers allowed us to maximize the savings that we were able to obtain from the market.
In collaboration with the client, Conseil 2.0 defined different scenarios of analysis and simulations to find the best solution that would meet the client’s needs and requirements.
Examples of scenarios realized:
- Cost based allocation: Allocate volume to the most competitive bids (Low cost, no constraints)
- Cost based allocation and capacity constraints: Allocate volume to the most competitive bids, while respecting the carrier’s capacity per lane and overall capacity.
- Allocation that favors existing carriers: Favor carriers that are currently active in the customer’s distribution network.
- Introduction of X% new carriers: Evaluate the impact of introducing a certain percentage of new carriers into the distribution network.
- Exclusion of brokers: Measure the impact of allocating 100% of the volume to asset base carriers only.
- Limiting the number of carriers to be used: Finding the optimal balance between the number of carriers to be managed and the coverage of total volume.
- Ability to allocate primary, secondary, and tertiary carriers.
- Comparison between the current and future network: Conseil 2.0 presented to the client an impact analysis, allowing them to have an overview of the expected savings following the implementation of the new distribution center.
Considering the client’s constraints and operational and strategic reality, Conseil 2.0 was able to analyze and compare more than 2000 Bids to provide optimal allocations that resulted from the optimization phase.
Results
The transportation tender that Conseil 2.0 managed, generated important savings for the client. Indeed, the baseline was reduced by 10%, resulting in a saving of $600,000. In addition, in response to Conseil 2.0’s achievements, the number of carriers our client had to deal with decreased by 65%. Thanks to this significant decrease, the client realized important transportation savings and was still able to provide equally effective coverage.
