“Can procurement really add value to logistics?"

“Procurement can add value to logistics”

Craig Bunker

Agenda

3

• Operating models where procurement adds value

• Procurement and logistics must have shared objectives

• How procurement can help logistics make a good case to finance

• Examples where procurement has added real value to logistics

Agenda

4

• Operating models where procurement adds value

• Procurement and logistics must have shared objectives

• How procurement can help logistics make a good case to finance

• Examples where procurement has added real value to logistics

5

Procurement can play a role in multiple models

Procurement capabilities such as tender specification, e-auctions, negotiation, SLA’s and commercial agreements can deliver logistics functions huge savings

3PL and 4PL Operations

• RFP Specification and tendering• Supporting negotiations• Commercial structure• Service Level Agreements• Benchmarking• Improved working capital

In House Operations

• Fleet / asset specification• Whole life cost modelling• E-Auctions and tenders• Supporting negotiations• Commercial structure• Service Level Agreements• Improved working capital

Agenda

6

• Operating models where procurement adds value

• Procurement and logistics must have shared objectives

• How procurement can help logistics make a good case to finance

• Examples where procurement has added real value to logistics

7

Will procurement affect logistics’ ability to deliver good service?

Procurement don’t listen to what I want

Service is more important than price

– failed deliveries cost more..

I have good relationships with my

suppliers – they always bend over

backwards to give me what I need

Procurement don’t understand logistics

Service is more important than price

– failed deliveries cost more..

I don’t want one national supplier –

they wont care about us.

Procurement Logistics

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Will procurement affect logistics’ ability to deliver good service?

Procurement Logistics

Skills and ToolsBusiness

Requirements

Joint Objectives

Agenda

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• Operating models where procurement adds value

• Procurement and logistics must have shared objectives

• How procurement can help logistics make a good case to finance

• Examples where procurement has added real value to logistics

10

Understanding Savings Levers

Procurement can demonstrate a rigorous approach which has covered every area of potential benefit

Acquisition Options Operational OptionsFuture Optimisations

Options

Capital Purchase

1. Fixed Chassis Pricing

2. Life-cycle Costing Review

3. Fleet Specification Review

4. Euro 6 Cost Mitigation

5. Transparent Cost Matrix

Hire Fleet

6. Evolution of Fleet Hire Model

7. Disaggregation of CAPEX / OPEX Elements for Hire Vehicles

8. Spot Fleet Creation

9. Ex-rental Transfer Opportunity

10. Mileage Balance for R&M Fleet

11. Fleet Modelling for R&M Fleet

12. Rebate for Early Termination of R&M Contracts

13. Parts Discount / Labour Rate Reductions

14. Managed Service Roll-out

15. VMU Expansion

16. Breakage Opportunity

17. Ancillary Parts Maintenance

18. Open Book Cost Modelling

19. Ancillary Body Supply

20. Ancillary Refrigeration Units

21. Ancillary Cameras

22. Ancillary Livery

23. Ancillary Fleetboard

24. Ancillary Tyres

25. Ancillary Windscreens

26. Ecofuel Trial

27. MPG Component Trials

28. Driver Training Initiatives

Cash Flow

Working Capital

ROI

RISK

BALANCE SHEET

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Speaking the language of finance

Procurement can demonstrate a rigorous approach which has covered every area of potential benefit Fleet Structure

Agenda

12

• Operating models where procurement adds value

• Procurement and logistics must have shared objectives

• How procurement can help logistics make a good case to finance

• Examples where procurement has added real value to logistics

13

Examples where procurement has added real value to logistics

Sea Freight pricing• Benchmark RFP’s issued to challenge the

single supply situation• Alternative suppliers used to stimulate

competition• Savings negotiated through identification of

key cost components and negotiating on them individually

• 4% saving achieved against a proposed 4% increase

Fleet Whole Life Cost Modelling• Developed a whole life cost model for a

large fleet • Demonstrated the optimal life and

financing options• Created an internal ‘hire fleet’ of older

vehicles• Savings of >£1.5m per annum

Trailer Purchasing• 11.3% savings against the best negotiated

rate• 3.3 % from e-auction• 8% from post auction negotiations

Vehicle Maintenance• Project 1 – audited internal

maintenance processes and costs vs third party outsourced maintenance. Results drove savings of 10% within internal workshops through efficiency

3PL Commercial Structuring• Advised a major food manufacture on

their new 3PL contract. • Implemented a bonus based on key

service and operational KPIs• Bonus drove improved service levels of

1.8%