Shipping cost optimization has become a major priority for the logistics, transportation, retail & wholesale distribution, and import/export industries since the first quarter of 2021 when gas and diesel prices started to climb out of the range they had been trading in for years.
With the reduction in oil & gas production and availability the contagion effect has been spreading to the entire economy through a steep rise in the price of energy. It is now critical for any organization to put their shipping costs under control.
This case study focuses on a cost-cutting mission RadiusPoint conducted with a nationwide supplier.
Challenge
A nationwide home medical equipment supplier, with 200+ locations across the United States, used large carrier companies to outsource their shipping. Their shipping operations were managed under two major contracts as well as a few smaller contracts for specific delivery areas. Our client was spending $7MM+ annually for shipping services.
The management team had isolated several different areas of concern with their current contracts. Shipping cost optimization had become part of a 2020 corporate initiative. They hired RadiusPoint to tackle the challenge.
Opportunity
- The two major carrier contracts were negotiated in-house with knowledgeable staff, but a few cost saving opportunities had been missed
- Accounts Payable had to process 360+ account numbers and 1,400+ invoices every month
- Many of the shipments were not time-sensitive, so our client used the cheapest service. Technology is not a big negotiation factor for current contracts.
- Rate shopping by the in-house team did not net needed savings, and was subsequently abandoned
Solution
In partnership with a logistics specialist, RadiusPoint had developed an e-Procurement portal to assist clients in identifying ways and methods to cut cost. To achieve the objectives of our shipping cost optimization mission, RadiusPoint brought in the logistics specialist with a view to cutting costs, negotiating new agreements, and identifying better shipping solutions.
What did we accomplish?
We performed a complete review of current shipping invoices in an historical audit. We identified multiple areas of opportunity for process improvement. In addition, we reviewed vendor contracts to identify overlooked areas of contract improvement: this yielded greater cost savings. The logistics specialist’s shipping tool also gave our client the capability to use shipping addresses to identify the lowest cost shipper for the route, within our client’s section of providers.
End Result
A reduction of $580K in monthly costs (16%) saving our client over $93K per month and $1.1M annually. We exceeded the objectives we had for this shipping cost optimization mission.
RadiusPoint has both the experience, the expertise and the software tools to help any organization trim down their shipping costs and impact their bottom line positively. Call us to review your plans and your objectives.
Additional resources
Cost savings on consolidation of services
Cost savings on utility services
Long-term trend in retail gasoline prices – US Govt Data