How a network design refresh unearthed $16 million in cost savings opportunities for a fuel distributor
Company snapshot
Profile
Industry: Retail
Size: 100+ employees
Location: HQ in Portland, Oregon
Overview
An ergonomic furniture company bringing maximum comfort to offices with standing desks and workstations.
Opportunity
Rightsizing facility and truck asset to drive efficiency
In 2022, a large US bulk oil and fuel distributor saw significant growth in its truck and warehouse assets due to multiple acquisitions. However, this business growth created an abundance of packaged goods, territory overlap and underused assets—all of which contributed to supply chain inefficiencies and waste. The shipping team needed to save money, free up capacity and use their fleet to the fullest extent. Getting access to the right data and transportation management support was crucial—prompting the company to refresh its supply chain network design.
The distributor typically shipped goods in two forms: Bulk oil in its own tanker trucks and packaged materials such as oil in canisters, air filters and wiper blades via LTL shipments. While data around bulk oil shipping was within network scope, the company lacked insight into how packaged goods impacted resources and costs. The logistics team suspected they could minimize bulk facility process complexity by consolidating packaged goods storage locations. Increasing utilization of their truck assets would also drive efficiency and eliminate waste—leading to more productive business operations overall.
The company partnered with Uber Freight’s Consulting team to better understand the impact of packaged goods on the network and how to best retool its design. Taking steps to reduce packaged goods in their fleet where possible—and to concentrate the goods within a few centralized warehouses—would ultimately help the distributor save on costs and increase capacity.
Solution
Data cleansing and a network analysis
The overarching objective for the two-month project was to develop a multiyear roadmap for reforming the distributor’s network. Before creating that roadmap, Uber Freight needed to map out the existing transportation processes and analyze data for fleet capacity and usage. Prior to partnering with the Consulting team, the company’s data was unreliable and too limited in scope to inform where and how to reduce and consolidate the goods. So the Consulting team had to cleanse the data before performing their analysis. Once completed, they discovered the company was spending more than $132 million on transportation within its existing network of 61 warehouses.
The Consulting team executed a network cost savings and capacity analysis to identify key opportunities for improvement, which included figuring out how warehouse rightsizing would impact total logistics costs and customer service; finding the best locations for a bifurcated packaged goods network; determining the best fleet makeup to maximize delivery efficiency; and understanding how tank monitoring technology could improve routing processes.
With these opportunities in mind, the Consulting team built several future state models to analyze these different scenarios and quantify their impact on facility transportation and inventory costs.
Results and takeaways
A roadmap to save $16 million over two years
The initial scenario found that the company could achieve at least $4 million in delivery savings through truck routing improvements. From there, the alternative scenarios found that shippers could save more than $1 million by having packaged goods shipped to optimal warehouses; an additional $11 million by modifying delivery dates to a five-day window; and an additional $600,000 by bifurcating the packaged goods network to have goods ship from 37 warehouses as opposed to 61.
In total, the distributor found an opportunity to save $16 million by implementing the different scenarios within their network design. The refreshed program is set to launch in April, with a roadmap to implement the following improvements over the next 24 months:
Bifurcate packaging material flow by consolidating the goods into four or five main warehouse hubs. Doing so would free up warehouse space and eliminate territory overlap.
Improve routing processes by relying on historical fill data provided by tank monitoring software. This routing optimization tactic would help the company be more strategic around when to route their fleet to customers based on when they actually need fuel refills, as opposed to sticking to a standard schedule.
Create a fleet dashboard and set key KPIs (around elements like fleet and capacity usage) to ensure the logistics team meets asset utilization benchmarks. Being able to track and measure the right KPIs would help the company make informed decisions that will help save money.