Optimizing Logistics Center Costs for a Fast-Growing Grocery Retail Chain
Case Study
Client:
Service Area:
Outcomes:
Customer Savings:
Grocery Retail Chain (50+ stores)
Digitizing manual processes
- Data-Driven Cost Allocation Model
- Dashboards (for supplier and logistics manager)
EUR 3.4M annually
A rapidly expanding grocery retail chain (RC) with 53 stores faced the challenge of managing the operational expenses of its centralized Logistics Center (LC). The LC, responsible for delivering goods to all stores except dairy and bakery products, which were delivered daily by suppliers, incurred an annual cost of EUR 3.4 million. RC aimed to split these costs among its 274 suppliers in a fair and transparent manner. The goal was to optimize the LC’s processes and calculate the costs for each supplier based on the nature and volume of goods they delivered, making it more cost-effective for suppliers to use the LC rather than delivering directly to each store.
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Cost Distribution Complexity: The need to accurately allocate the EUR 3.4 million annual cost among 274 suppliers, considering various factors such as the type of goods (ambient, frozen, etc.) and the volume delivered.
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Supplier Engagement: Ensuring that all suppliers agreed to the cost allocation model, understanding that centralized delivery through the LC would be more cost-effective than direct store deliveries.
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Process Optimization: Streamlining the logistics processes to ensure that the cost model was fair and reflected the efficiencies gained from using the LC.
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Data Management: The necessity to acquire, integrate, and analyze vast amounts of data from multiple suppliers to create a transparent and accurate cost allocation model.
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Data-Driven Cost Allocation Model: Developed a detailed cost distribution algorithm based on data analytics that took into account the type of goods, volume, and frequency of deliveries. This model ensured that each supplier's cost was significantly lower than the expense of direct store deliveries.
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Supplier Dashboards: Created a Supplier Dashboard that allowed each supplier to view their specific cost breakdown, the volume of goods delivered, and the factors influencing their pricing. This transparency helped gain supplier buy-in and fostered trust in the new cost model.
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Logistics Management Dashboard: Developed a comprehensive dashboard for RC’s logistics management team to monitor and manage the costs, supplier engagement, and overall LC operations. This tool provided real-time insights and facilitated decision-making.
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Optimized Processes: Conducted a thorough analysis of the LC’s operations and identified opportunities for process improvements. This not only reduced operational costs but also made the LC more efficient, benefiting both RC and its suppliers.
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New Supplier Engagement Model: Established a framework for onboarding new suppliers with a clear, data-driven pricing model, ensuring smooth integration into the RC’s supply chain.
The project successfully met its objectives, resulting in significant cost savings for RC and its suppliers. By implementing the new cost allocation model, RC was able to eliminate the $3.4 million annual LC maintenance cost from its expense list, fully passing it on to the suppliers in a way that was mutually beneficial. Suppliers agreed to the new pricing model, recognizing the cost-effectiveness of centralized logistics.
Moreover, the development of the Supplier Dashboard increased transparency and improved supplier relationships, while the Logistics Management Dashboard provided RC with greater control and insight into its operations. The optimized processes led to a more efficient supply chain, positioning RC for continued growth.
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product discovery
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business process modelling/optimization
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rapid prototyping
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data acquisition and integration
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data wrangling and cleaning
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data analytics
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algorithms development
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business intelligence
"Partnering with DataRise Studio has been transformative for our logistics operations. The innovative cost allocation model and the transparency provided by the Supplier Dashboard have not only helped us eliminate a significant expense but also strengthened our relationships with our suppliers. The process optimization and the new supplier engagement model have set us up for long-term success. We are thrilled with the results and look forward to continuing our partnership with DataRise Studio."
— Deputy Director of Operations
