This framework is developed by a team of former McKinsey and Big 4 consultants. The presentation follows the headline-body-bumper slide format used by global consulting firms.
Companies looking to improve efficiency and reduce costs can gain significant ground in the Supply Chain function. Reason this area has gone under the radar is that companies do not consider Supply Chain to be their core competency.
Not only Warehousing, but Transportation also has almost the same potential in terms of opportunities for Cost Reduction and Process Efficiencies. In fact, a full-picture analysis of Transportation presents a 20-30% Costs Saving opportunity. The approach to Transportation Costs Reduction, though, is different to that of Warehousing.
This presentation discusses in detail the 2-phased approach to Transportation Cost Reduction:
1. Understand the Baseline
2. Identify and Implement Opportunities
We discuss phase in depth. Within the second phase, we specifically discuss 4 levers of Cost Reduction opportunities:
1. Compliance with Contracted Price
2. Negotiated Price
3. Contract Terms
4. Customer Breakpoints and Behavioral Changes
The slide deck also includes some slide templates for you to use in your own business presentations.
This comprehensive guide delves into the nuances of Supply Chain Costs, emphasizing the critical role of Transportation in achieving substantial cost savings. It highlights the importance of understanding the baseline and identifying opportunities for cost reduction. The PPT provides a detailed analysis of three critical service areas—Temperature-controlled Distribution, Special Delivery Services, and Shipment Size—that disproportionately affect costs.
The presentation also covers Lean Six Sigma methodologies to streamline processes and eliminate waste, offering practical templates for implementation. By focusing on compliance with contracted prices, negotiating better terms, and understanding customer behavior, companies can unlock significant savings. This resource is essential for executives aiming to optimize their transportation strategies and drive cost efficiency.
This PPT slide outlines critical factors impacting transportation costs within organizations. Understanding the operational baseline is essential for identifying improvement areas. Variability in operations, driven by diverse customer demands and service levels, complicates transportation optimization. Organizations can achieve cost savings of 20-30% by analyzing historical shipment data, including delivery sizes, modes, types, regions, and costs. This data-driven approach helps leaders pinpoint primary cost drivers in their transportation strategy. Three essential service categories disproportionately affecting costs are Temperature-controlled Distribution, Special Delivery Services, and Shipment Size, each presenting unique challenges and opportunities for cost management. Leveraging data analytics allows organizations to align services with customer needs while optimizing costs, particularly in industries like pharmaceuticals, where logistics significantly impact the cost of goods sold.
This PPT slide outlines strategies for negotiating contract prices in freight transportation, focusing on 2 primary methods. The first method emphasizes establishing a reference point for freight rates by comparing shipment rates from various suppliers on similar routes to create a negotiation benchmark. The second method is Clean-Sheet Cost Modelling, which analyzes the optimal mix of vehicle, fuel, labor, and operational costs to deliver a specified service level, identifying inefficiencies in suppliers' operations. Costs are categorized into variable costs, such as fuel (24% of total costs), and fixed costs, including labor (32%). Effective negotiations can yield savings of 15% to 50% by leveraging cost components and supplier inefficiencies.
This PPT slide outlines strategies for optimizing transportation costs by analyzing customer behavior and identifying key breakpoints. It advocates for wholesalers to shift from frequent deliveries to a consolidated approach, which can significantly reduce transportation expenses. The visual data illustrates the average delivery size and total weight shipped, highlighting that increasing delivery size enhances logistics efficiency. Current practices show excessive delivery frequency, with more than 7 deliveries per week deemed unnecessary. By reducing delivery frequency to an average of 2 per week, organizations can realize substantial cost savings. The expected baseline after implementing these changes reinforces the financial benefits of adjusting delivery strategies, ultimately improving logistics performance and customer experience.
This PPT slide outlines a two-phased approach to reducing transportation costs in supply chain management. The first phase, "Understand the Baseline," emphasizes the importance of analyzing current transportation costs to identify efficiency opportunities. Without a clear understanding of existing expenditures, cost reduction efforts may lack direction. The second phase, "Identify and Implement Opportunities," focuses on actionable steps for organizations to address identified inefficiencies through data analysis and cross-team collaboration. The complexity of transportation costs, arising from numerous distributed operations, necessitates thorough analysis to effectively navigate potential reductions. This structured methodology aids businesses in optimizing transportation costs and enhancing overall supply chain efficiency.
This PPT slide outlines 4 key levers for cost reduction in transportation:
1. Compliance with Contracted Price: Adhering to agreed payment terms and reviewing contracts to uncover hidden charges can reveal potential savings.
2. Negotiated Price: Benchmarking against suppliers to identify the lowest possible costs can lead to substantial savings, especially if companies are unaware of market rates.
3. Contract Terms: Linking rates to external indices, such as fuel prices, helps avoid unnecessary expenses during price fluctuations.
4. Customer Breakpoints and Behavioral Changes: Analyzing customer ordering habits, such as unnecessary early deliveries, allows companies to optimize logistics strategies and reduce costs.
Implementing these strategies can yield up to 40% in savings.
This framework is developed by a team of former McKinsey and Big 4 consultants. The presentation follows the headline-body-bumper slide format used by global consulting firms.
For $10.00 more, you can download this document plus 2 more FlevyPro documents. That's just $13 each.
ABOUT FLEVYPRO
This document is part of the FlevyPro Library, a curated knowledge base of documents for our FlevyPro subscribers.
FlevyPro is a subscription service for on-demand business frameworks and analysis tools. FlevyPro subscribers receive access to an exclusive library of curated business documents—business framework primers, presentation templates, Lean Six Sigma tools, and more—among other exclusive benefits.
The average daily rate of a McKinsey consultant is $6,625 (not including expenses). The average price of a Flevy document is $65.
Trusted by over 10,000+ Client Organizations
Since 2012, we have provided business templates to over 10,000 businesses and organizations of all sizes, from startups and small businesses to the Fortune 100, in over 130 countries.
"I have used Flevy services for a number of years and have never, ever been disappointed. As a matter of fact, David and his team continue, time after time, to impress me with their willingness to assist and in the real sense of the word. I have concluded in fact
that it is not at all just a repository of documents/resources but, in the way that David and his team manage the firm, it is like dealing with consultants always ready to assist, advise and direct you to what you really need, and they always get it right.
I am an international hospitality accomplished senior executive who has worked and lived during the past 35 years in 23 countries in 5 continents and I can humbly say that I know what customer service is, trust me.
Aside from the great and professional service that Flevy's team provide, their wide variety of material is of utmost great quality, professionally put together and most current.
Well done Flevy, keep up the great work and I look forward to continue working with you in the future and to recommend you to a variety of colleagues around the world.
"
– Roberto Pelliccia, Senior Executive in International Hospitality
"As a young consulting firm, requests for input from clients vary and it's sometimes impossible to provide expert solutions across a broad spectrum of requirements. That was before I discovered Flevy.com.
Through subscription to this invaluable site of a plethora of topics that are key and crucial to consulting, I
have been able to exceed expectations and deliver quality advice and solutions to my clients. The quality and expertise of the authors are exemplary and gives me great confidence to use as part of my service offerings.
I highly recommend this company for any consultant wanting to apply international best practice standards in their service offerings.
"
– Nishi Singh, Strategist and MD at NSP Consultants
"As an Independent Management Consultant, I find Flevy to add great value as a source of best practices, templates and information on new trends. Flevy has matured and the quality and quantity of the library is excellent. Lastly the price charged is reasonable, creating a win-win value for
the customer, Flevy and the various authors. This is truly a service that benefits the consulting industry and associated clients. Thanks for providing this service.
"
– Jim Schoen, Principal at FRC Group
"One of the great discoveries that I have made for my business is the Flevy library of training materials.
As a Lean Transformation Expert, I am always making presentations to clients on a variety of topics: Training, Transformation, Total Productive Maintenance, Culture, Coaching, Tools, Leadership Behavior, etc. Flevy
It is well worth the money to purchase these presentations. Sure, I have the knowledge and information to make my point. It is another thing to create a presentation that captures what I want to say. Flevy has saved me countless hours of preparation time that is much better spent with implementation that will actually save money for my clients.
"
– Ed Kemmerling, Senior Lean Transformation Expert at PMG
"I have used FlevyPro for several business applications. It is a great complement to working with expensive consultants. The quality and effectiveness of the tools are of the highest standards."
– Moritz Bernhoerster, Global Sourcing Director at Fortune 500
"FlevyPro has been a brilliant resource for me, as an independent growth consultant, to access a vast knowledge bank of presentations to support my work with clients. In terms of RoI, the value I received from the very first presentation I downloaded paid for my subscription many times over! The
quality of the decks available allows me to punch way above my weight – it's like having the resources of a Big 4 consultancy at your fingertips at a microscopic fraction of the overhead.
"
– Roderick Cameron, Founding Partner at SGFE Ltd
"FlevyPro provides business frameworks from many of the global giants in management consulting that allow you to provide best in class solutions for your clients."
– David Harris, Managing Director at Futures Strategy
"As a small business owner, the resource material available from FlevyPro has proven to be invaluable. The ability to search for material on demand based our project events and client requirements was great for me and proved very beneficial to my clients. Importantly, being able to easily edit and tailor
the material for specific purposes helped us to make presentations, knowledge sharing, and toolkit development, which formed part of the overall program collateral. While FlevyPro contains resource material that any consultancy, project or delivery firm must have, it is an essential part of a small firm or independent consultant's toolbox.
"
– Michael Duff, Managing Director at Change Strategy (UK)
Receive our FREE presentation on Operational Excellence
This 50-slide presentation provides a high-level introduction to the 4 Building Blocks of Operational Excellence. Achieving OpEx requires the implementation of a Business Execution System that integrates these 4 building blocks.
Click main image to view in full screen.
