Case study
Right-sized costs
“Why does this store seem to run out of what I really need when I’m in a hurry,” says a shopper who can be heard in the aisle of a grocery store on any given day. “But yet they are always well stocked on many other items we like…” replies an accompanying shopper.
When a store runs out of popular products, logistics challenges can often be the blame. And foods and beverages cannot be delivered to grocery stores when the ingredients that make such products better tasting and longer lasting (cooking oils, wine and beer, seasonings and spices, etc.) do not make it to the manufacturer.
For many of these manufacturers, market volatility is an ongoing challenge when managing the costs associated with moving the ingredients that ultimately go into the food on our plates. Clients rely on Odyssey to help make sense of the ever-changing climate of transportation, but more importantly, to help identify cost-savings and strategic changes to improve service – to ultimately get product on shelves.
This can all be avoided when a proactive lead logistics provider is keeping an eye on the bigger picture, responding to changes in costs and distribution demands, to manage the true costs of transportation.
Pricing that goes beyond freight costs
Nearly 70 percent of products delivered today include the price of freight, which is embedded in the final cost. Unfortunately, many corporations will develop a static table of fixed freight costs that are amended to production costs to create a final selling price.
Many clients know the cost of doing their own business. They know the cost to make the goods, but without Odyssey, they truly don’t understand the intricacies involved with freight. Our clients are able to take the data we’ve captured and go back to reevaluate their selling price to get a better understanding of freight costs.
As the data is analyzed, the picture becomes clearer when real numbers illustrate the actual freight cost for manufacturers. More often than not, clients will see that they’re spending too much on freight, and in some cases, not enough. Clients will then re-price the new freight numbers against their fixed, rudimentary pricing and see astonishing savings results. By the numbers, right-sizing pricing is worth millions when compared to freight savings.
Supply chain mix analysis: why the costs shift
When pricing is right-sized, there are still factors that affect the supply chain. Everything from fuel costs and carrier fees to labor and the fluctuating economy affect the bottom line. One common misconception is that carrier costs are first to blame for rising logistics costs. Carrier costs are often the first line of defense for companies that don’t have a grasp or understanding of their logistics and supply chain mix. To provide insight, Odyssey conducts a mode summary, or a mix study, that identifies where the costs are changing and what’s driving the price increase.
For instance, one manufacturer’s restocking lanes ended up being a lot longer. The ideal situation is to set up warehouses in close proximity to major customers. The closer the warehouse, the cheaper it is to inventory product to the customer. This particular company restructured their lanes and incorrectly ended up using lanes that had a lot of extra costs. After looking at the data, it identified that stock transfer orders were the culprit, and their internal restocking costs went up because of their supply chain mix.
To solve this type of issue, Odyssey provides data which allows the client to then restructure their inventory and warehousing to move product more efficiently from the warehouse to the customer and onto shelves worldwide.
The savings proposed is nothing compared to the business impact you can make on their side of the fence. That’s where Odyssey shines and demonstrates keen expertise.
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