Improving delivery times by 50% to enhance service and margins (CS259)

Using analytics and supply chain expertise to optimize your supply chain and distribution network

This story is for executives who:

• Need to rapidly enhance delivery times to maintain marketplace competitiveness and enable growth

• Want to develop a new roadmap for a business model and optionality

• Need to increase margins from inventory and network optimization

The Challenge

In an ecommerce environment in which customers expect online ordered goods to be delivered within a few days, the client, a high-end women’s fashion company, was experiencing an increase in demand and unable to fulfill those customer expectations on a regular, timely basis. Some customers experienced wait times of up to 9 days.

Its parent company foresaw that within 3 years its high-end women’s fashion company could double in revenue, but only if the current structure of their distribution model was overhauled. To gain visibility and guidance of their supply chain and distribution strategy, they sought after Maine Pointe.

The client and its parent company had two primary goals:

1. Define a strategy and execution plan to evolve the business delivery model from 6.5 to 3 days.
   
   
2. Define a 3Pl provider who could grow with the client, execute and maintain a sustainable distribution model. This model would execute the customer delivery promise (3 days) and could grow to support a 100% increase in revenue achievable growth in 3 years.

Customer Experience
Swift delivery is one of the pillars of a great customer experience. The client saw customers cancelling orders or moving onto other stores when they realized their clothing, in many cases, would take more than a week to arrive. This was a huge hit to the customer experience and satisfaction.

By applying data to every step, Maine Pointe showed the client where its current model was slacking, how much they could save, and how they could pave the way for a happier customer in the long term.

Optionality
While most successful companies understand the importance of optionality of distribution and supply, some don’t implement the strategy until a crisis hits. At its core, ‘optionality’ is a strategy that better prepares you for changes in the future.

Analysis
The client relied heavily on a distribution center on the West Coast, while leveraging its 31 store locations nationwide as pseudo-warehouses. Approximately 20% of the client’s online sales were shipped from its stores. If a customer from the East Coast ordered online and a nearby store location didn’t stock the item, then it would have to be shipped from the West Coast, which on average took 6.5 days.

In using its analysis and distribution model software Maine Pointe was able to:

• Create 42% savings on inbound freight
• Create an optimal warehouse and distribution network for now and 3 years into the future
• Achieve a 3-day lead time
• Optimize the inventory strategy

The Results

Maine Pointe helped the client achieve the following:

• Reduced delivery times by 50% (from 6.5 days to 3)
• Implemented a delivery model that will deliver products in 1-2 days
• Drove 42% savings on inbound freight
• Developed a roadmap to achieve a 4% margin increase, year to year
• We shifted the format from dual inventories to singular inventory which allowed better service for e-comm customers
• Delivered project ROI of 7 to 1

Lessons learned for other executives

• Optimizing your distribution network and new distribution models can lower inbound freight cost
• When you dive deep into data you can apply new models to enhance delivery time and margin
• Taking a holistic approach can help drive value to your business environment
• It’s imperative to have visibility and insights across your network if you’re going to optimize distribution.