Over $500K a year saved on both sides of a low-margin minerals supply chain

Network Design Truckload Minerals and chemicals
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WHO

Business model

An international producer of high-performance minerals: talc, precipitate calcium carbonate, ground calcium carbonate, lime, dolomite, and barites. You will find these chemicals in just about everything, including paper, plastics, paint, gum and pharmaceuticals. Product is delivered to manufacturers on tight production schedules.

Industry

Minerals and chemicals, sold on thin margins where freight is a large share of the delivered cost.

PROBLEM

What they felt

The client was challenged with improving margin on goods and eliminating service disruptions. After paying the freight to deliver orders to manufacturers, there was little profit margin left on the merchandise.

What we found

Since this product was delivered to meet tight manufacturing schedules, truckload service was determined to provide the most consistent on-time delivery. Other issues besides the high cost of shipping were:

  • Lack of trailer availability at the production facility
  • Delays from inclement weather
  • The loss of one pallet space to tire chains in the winter

WHAT WE DID

Prep and analysis

Our project focused on the northeast region of the U.S., where the delays and the expedited freight were concentrated.

Execution

We constructed a new supply chain that was more economical and more resilient. A small amount of inventory was built to better control just-in-time replenishment and emergency orders, eliminating the need to expedite orders. Although inventory grew slightly to accommodate the new supply chain it had little effect on cost, because inventory had a low value.

We solved it for their customer too

The redesign was not built to move cost onto the next party in the chain. Cost savings from the new distribution method enabled our customer to reduce its price to its customers while increasing sales.

RESULTS

What they got

Over $500,000 a year for the client, and the same again for their customer

The redesign produced over $500,000 in annual savings to the client and over $500,000 in annual savings to their customer.

Service improved considerably while margin grew significantly. Delivery cost came down, lead times shortened, goods sit in better positions in the network, and emergency demand no longer triggers an expedited shipment that wipes out the profit on the load.

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