Transferring knowledge and installing center-led logistics alignment for a global chemical manufacturing company.
This story is for CEOs who:
- Are preparing to embark on a supply chain transformation project to improve competitiveness
- Have responsibility for developing an integrated, cross-functional supply chain
- Need to move logistics relationships from tactical and transactional to strategic
- Use intermediaries such as 4PL service providers to execute in the supply chain
The Challenge
This global organization develops, manufactures, licenses and supports industry-leading technologies through catalysts and materials technology business segments.
The company’s new CEO was committed to implementing an integrated supply chain process across the organization. The goal was to facilitate collaborative relationships with suppliers and manage distribution and logistics activities through a centralized system to improve efficiency, save on costs and enhance value for clients. To drive this initiative, the company had appointed a leader responsible for the end-to-end supply chain. The CEO decided to bring in additional outside support, and selected Maine Pointe based on its differentiated TVO step-by-step approach to digital supply chain transformation.
Earning a place at the table for logistics and distribution
Previous bad experiences had resulted in a degree of ‘consultant fatigue’ within the client’s organization. To help overcome this, and build trust in the consulting process, Maine Pointe was initially asked to focus on optimizing logistics to support the organization’s broader vision.Our analysis team found a very siloed, sales-driven organization without an integrated logistics and distribution footprint. In addition, the organization relied heavily on 4PL service providers for procurement of services and execution support without well-developed governance. Corporate logistics was isolated and needed to “earn its place at the table” to influence the business. To help achieve this, Maine Pointe needed to build capability and confidence in the people and provide a language and framework for integrated logistics that added value to the business.
To change the perception of logistics within the business Maine Pointe, working with the client team:
- Implemented a 3rd party railcar switch which resulted in a 46% reduction in rail switching costs while mitigating the risk of a rail embargo
- Established rail route optimization capabilities and identified 21 alternative routes that reduced freight costs and transit times
- Provided railcar fleet visibility and tracking with a comprehensive tool that provides up-to-the minute status and tracking of the entire rail fleet
- Completed a comprehensive logistics procurement process for all four modes (bulk truck, full truckload, less than truckload, drayage). This workstream significantly exceed forecast, and delivered a 22% reduction in freight costs
- Established a new approach to air freight that delivers 7% annualized cost savings
- Supported these savings with a freight exception approval process (FEAP) to ensure mutual accountability and address gaps in the logistics and planning processes
- Developed an inventory projection and capacity model that is now the standard for the client’s inventory management
- Used this tool to determine the warehouse requirements for a 50% increase in production at one plant
Facilitating Cultural Change
It became apparent that changes in the culture and the way decisions were made would be a major part of the company’s transformation. Maine Pointe’s Leader & Organization Improvement (LOI) specialists played a significant part in helping the client’s people learn to trust each other, believe in their processes and understand the importance of integration. To do this, our people led by example, modeling a set of behaviors which encouraged a new way of making decisions that drove significant value.
Maine Pointe’s team helped position the integrated supply chain organization as a strategic asset and gain credibility for the logistics organization. The results the joint team achieved proved to the client that engaging outside consultants can deliver significant business value.
The Results
Maine Pointe’s subject matter and industry experts worked closely with the client’s leadership and logistics team as they took the first steps towards an integrated end-to-end supply chain, delivering the following results:- Reduced rail switching costs by 46%, rail freight costs by 18% and rail shipping costs by 2%
- Achieved an 18% reduction in on-the-road (OTR) line haul rates across all freight modes
- Created a 7% reduction in air freight spend, supported by a freight exception approval process
- Developed an inventory projection and capacity model which determined the warehouse requirements for a 50% increase in production at one plant
- Developed a logistics playbook that ensured sustainable business benefits and new capabilities
- Positioned the integrated supply chain organization as a strategic asset and gained credibility for the logistics organization
Lessons learned for other executives
- Organizational transformation is a step-by-step journey which requires commitment and perseverance at the executive level and CEO support
- Working across silos to make better decisions for the company adds exponential value and organizational trust
- In its early stages, transformation is fragile and needs ongoing investment from leadership to make it stick