TCII :: Management Consultants
Building Profitable Business
By the end of the first year the business developed from a loss making to a break-even service.
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From loss-making to break-even in a year
Our client, a mobile phone retailer, ran their warehousing and logistics operation from premises in the West Midlands gained through an acquisition made five years previously. This was the major cost centre of the organisation and they had been unable to significantly improve it for two years.
Our challenge
We had to understand the cost drivers in the business and what value they added to the business proposition. Our task was then to systematically remove, reduce, or replace those whose value was outweighed by their cost.
What we did
We first looked at transportation. The client owned their own vehicles but used the services of a national carrier, effectively managing the carrier's drivers and delivery routes themselves. Through recruiting a transport manager, transport was brought in-house and the carrier’s annual management fee of over £200,000 eliminated.
Another major cost was headcount, as the operation was highly labour intensive. We re-engineered the process flow to achieve a flexible, fast, low error and low cost system that could operate 24/7. We did so using RF identity tags on individual items, pallets and vehicles, leading to a high degree of automation and a payback of less than 12 months. Further negotiation with major suppliers ensured deliveries were made with goods already tagged.
The process took 12 months and, as staff left, there was no need to replace them due to the reduced need for labour.
Finally, contracts were set up with partners who were interested in using the previously unused ‘back load’ capacity of the trucks, generating extra income.
The outcome
By the end of the first year the business developed from a loss making to a break-even service.
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