DCC MODEL = SAVINGS + SERVICE

Challenge

In 2014, a major manufacturer of medical technology spent nearly $1.1M in freight cost on inbound shipments of raw materials, supplies, and parts to their manufacturing lines from the Midwest region (comprising MN, IA, IL, and WI). All shipments were executed by third-party carriers and planned on an individual basis between the supplier and carrier. Analysis of the 2014 data revealed a high frequency of pickups occurring at many of the supplier locations each week – an average of 36 pickups for the 16 suppliers in the region. Additionally, each pickup was of relatively low volume – an average 3.1 skids. This combination of a high frequency of pickups coupled with low volume led to discussions of how Kenco could partner with the manufacturer to lower freight cost via freight consolidation and help improve the front half of the supply chain.

Solution

Freight data from 2014 and 2015 was analyzed using a number of different methods in order to fully analyze the impact of consolidating shipments. Kenco determined a transition from using third-party carriers to Kenco dedicated assets would help reduce freight cost significantly. This transition, divided into two phases, estimated to save $271k in Phase 1 and an additional $247k in Phase 2.

To support this change, a system for processing pickup requests – Pickup Information eXchange (PIX) – was developed by Kenco IT and implemented in October 2015. Business rules were implemented and communicated to suppliers, controlling which days would be available for pickups when needed.

Results

After three months of activity, actual realized savings from the transition to Phase 1 were calculated to be over $88k, for a projected annual savings of $326k+ based on the changes from just Phase 1 alone – greater than the estimated savings of $271k. The savings per stop and cumulative project savings over this three-month period are shown below: 

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