Tim Fawkes explains how companies can reduce transport costs whilst maintaining high levels of customer service using the example of their work with the components division of JCB.
If there’s one good thing to come out of a recession, it’s the fact that it forces businesses to streamline their systems and implement more cost effective strategies. Faced with the double whammy of growing expenses combined with increasingly cost conscious clients, companies now really need to ensure that they are operating at maximum efficiency.
Transport management is often an area that is ripe for attention and improvement. Hauliers have experienced rapidly escalating costs (an inflation busting 12% during 2010) and these costs have to be passed on somewhere. In addition, measures to tax companies on the carbon generated by their transport operations are imminent. In order to comply with EU targets to reduce carbon emissions, the UK government has announced plans to halve emissions by 50% by the year 2025. Mandatory carbon reporting is soon to be implemented, whilst steps to tax dirty fuel such as coal and diesel are expected by the end of 2012.
Cutting transport expenses with 3T
JCB Service is the division of JCB responsible for providing replacement parts from two centres: the UK based JCB World Parts Centre (WPC) which supports over 180,000 parts and the European Parts Centre (EPC) in France which processes orders for urgent deliveries to dealers throughout mainland Europe. When the company called in 3T in 2008 to look at their transport expenses, the challenge was to reduce costs whilst maintaining the high standard of customer service that the company prides itself on.
Introducing Global Carrier Manager
The first stage of the project was the implementation of a transport management system in the European Parts Centre. Developed in house by 3t’s transport experts, the installation of the Global Carrier Manager (GCM) system consisted of 3 key elements.
Identifying the optimum carrier partner for each service level and region.
Introducing and integrating GCM with the JCB order management and warehouse management system to create track and trace visibility for dealers.
Managing the ongoing transport operation, producing detailed monthly management reports including a breakdown of transport costs.
The installation of GCM not only resulted in improved visibility of information for dealers and ensured a better understanding of transport costs, but most importantly, it reduced transport costs by a quarter within a year.
After its success at the EPC, the system was introduced at the World Parts Centre with some modifications. In order to integrate with the carriers and ensure reporting accuracy, GCM created carriers’ labels in their own format. Applied to the containers in the JCB warehouse, the labels had all the necessary information, reducing demands on administration as well as providing improved visibility.
Other transport management initiatives that were introduced include:
The dealer web portal – this enables all JCB dealers to log onto their own private web page and search GCM for their orders, including access to a range of relevant delivery data. As a result, customer service queries dropped by 30%.
Management reporting – reports are now created directly from GCM and include a range of information from standard cost per dealer and country / service to the cost to serve each dealer. The importing of sales invoices also enables JCB to identify transport cost as a percentage of sales.
Greenhouse gas reports – these follow Defra 2008 guidelines and enable JCB to measure their carbon emission on a monthly basis. The data is used to generate initiatives and dealer incentives to reduce their environmental impact.
Not all companies have the diverse transport demands of an international organisation like JCB, however most businesses would benefit from taking a second look at their transport operations and employing some fundamental management principles. If done properly, systems can be introduced that both reduce costs and actually enhance the customer experience.
Tim Fawkes is the Business Development Director at 3t Logistics, and has over 20 years’ experience in the logistics industry. 3t have offices in UK, France and Spain and customers include Linpac Packaging, Saica Pack and F Benders. For more information contact Tim on 01162 824 111, or email email@example.com