{{B}}Route to big delivery savings{{/B}}
There are few areas left within the world's largest businesses where one close look can deliver instant savings of 1 per cent of sales. For Rhodia, the chemicals arm of French conglomerate Rh6ne-Poulenc, scrutiny of the company's transport costs in the UK led to just such savings. Management consultants A.T. Kearney were commissioned to review the company's operations. They scoured order books, invoices and transport logs at the company's fourteen UK sites. some transport they could not account for at all Surprising as it may seem, there were simply no records.
A.T. Kearney's initial survey found that transport accounted for 10 per cent of the company's traceable spending in the UK, and that during a 12-month period, 235 different hauliers had moved products for the company. The company were also running a 30-strong fleet of their own.{{U}} (9) {{/U}}In a more positive light, though, they meant that the opportunity to improve was huge.
Transport buying was being dictated by the backgrounds of the buyers, rather than rational criteria.{{U}} (10) {{/U}}Instead, they were typically former drivers or site workers who bought transport from a network of contacts built up over many years.
Even where buyers were seeking tile cheapest transport, their task was complicated by numerous different tariffs for different measures. For A.T. Kearney, the solution lay in a comprehensive, standardised tendering process. During the following weeks, all the company's existing suppliers, Rhodia's own fleet, and others were invited to tender for business.{{U}} (11) {{/U}}Modelling of these responses began: what if this part of the business was given to X, and this part to Y - what does it do to costs?
Rhodia then went back to the most promising applicants and offered them deals for packages of business.{{U}} (12) {{/U}}In this way the company ensured that they got the best possible arrangement. Inevitably, this process favoured large suppliers.{{U}} (13) {{/U}}For example, a driver with his own lorry, who had been transporting goods for the company for years, submitted a tender. A sub- contracting arrangement was made for him with one of the final suppliers.
Today, Rhodia have five main hauliers, who account for 90 per cent of the company's transport spending. All rates are standardised: the whole system is a very simple one. But perhaps the most extraordinary outcome from this monumental number-crunching exercise was the bottom line impact.{{U}} (14) {{/U}}The new set-up has delivered savings of more than 25 per cent. And the company is confident of achieving even more savings.
A Before the review, transport was eating up 3 per cent of the company's UK sales revenue.
B Nevertheless, the situation was not helped by the fragmented nature of the haulage industry.
C More than 60 did so, and their quotes were then analysed.
D Among the terms they included in these contracts were requirements for improvements in costs, flexibility and reliability.
E None had come into logistics as part of a management career.
F But hauliers at the other end of the scale were not automatically' excluded.
G These results horrified the company, as they were far worse than had been anticipated.
H Some transport they could not account for at all.