15% more turnover thanks to optimization of the supply chain at importer of southern specialty foods
09th Feb 2023Until recently, an importer of southern specialty foods was faced with a serious challenge. They didn’t deliver from stock, so customers had to wait up to a week for their orders. The result? Customers ordered small volumes to ensure that their delivery was fresh. valueXstream put their supply chain through a thorough overhaul to achieve efficiency gains and increased turnover.
The premise
Belgian catering suppliers love southern specialty foods, from tapenades and hummus to pesto and oven-dried tomatoes. So the client’s low order volumes had nothing to do with a lack of demand from the market. “The problem was in the supply chain,” says Marc Van Hoeck of valueXstream. “Our client wasn’t holding stock in Belgium, so customers had to wait at least a week for their orders. To ensure fresh products and to prevent waste, they only placed small orders. This meant the company’s turnover stagnated.”
The solution
A logistics assessment was done to discover how the company could deliver faster, with the aim of boosting order volumes. “This exercise showed that setting up a warehouse would drastically shorten delivery times.” A survey of catering suppliers made it clear that this effort would lead to bigger orders.
Cost-benefit analysis
valueXstream mapped out a full cost-benefit analysis of the project. “We compare the potential sales increase against the costs, such as the costs of the warehouse, utilities, and picking costs. That forecast revealed that holding stock locally would increase sales by 25% within 10 years,” says Van Hoeck. “In the longer term, we are more flexible with regard to phasing in and phasing out the product range.”
Practical effect
Based on valueXstream’s research, it turned out that the best solution was to outsource the warehouse management to a logistics partner. valueXstream prepared a request for quotation (RFQ) detailing all requirements in terms of packaging, software, labeling, traceability, and quality control. “We also chose the warehouse location. By documenting everything in detail, we were able to objectively compare the various logistics services providers,” continues Van Hoeck.
“Having their own warehouse and being able to purchase larger volumes meant the company could negotiate better terms from their suppliers. In addition, freight costs also decreased.”
Efficient inventory management and restocking of the local market
The valueXstream experts found major differences in rotation speed. They divided the inventory into three product groups (fast, medium, and slow) to create a more efficient restocking methodology. Each product group has its own order schedule. Fast products, for example, are done per week and per full pallet. For small quantities, the customer negotiated a discount when they order 14 days in advance.
SLA, labeling, and electronic order system
The customer bundles all agreements with its suppliers in a service level agreement (SLA). “To support the client, we created a methodology in Excel,” adds Van Hoeck. “It takes into account historical sales figures, delivery terms, and minimum order quantities.” valueXstream helped the company set up an in-house labeling system and implement an electronic ordering system. “Finally, we also made sure the catering suppliers knew about the faster delivery time,” concludes Van Hoeck.
The result
✔️ From 14 days delivery time to one day for Belgium and two days for the Netherlands. Thanks to the local stockholding and better terms with producers, the company can deliver to its customers much faster.
✔️ Because customers are receiving their orders faster, turnover has grown by 15%. Thanks to faster delivery, catering suppliers can order last-minute in good weather, which has led to a 15% increase in turnover.
✔️ A better overview of stock and order patterns has led to up to 30% less waste in the chain due to longer shelf life. By purchasing larger quantities more cheaply, driving full trucks, and reducing administration, logistics costs were reduced by almost 15%. This saving meant extra cost of stockholding turned out to be almost zero.