Global pharmaceutical company
Business need addressed:
Integrating the parent and acquired companies’ logistics and transportation operations to realize synergies, higher efficiency, and effectiveness
- In-depth assessment of the transportation networks of both companies, including their supplier, plant, and hub locations
- Advanced analytics and logistics planning to model the future state transportation network
- Target operating model design in collaboration with the lead logistics service provider, to achieve identified opportunities
- 25% reduction in transportation costs due to realized synergies
- Increased service level performance to 99% on-time pick-ups and deliveries
A global pharmaceutical company was looking to identify synergies in operations after a big-ticket acquisition. Although the companies began with disparate infrastructures, advanced modeling and logistics planning support from Genpact enabled the combined entity to identify a 25% reduction in transportation costs due to realized synergies and improved service level performance
After the merger, the parent pharmaceutical company and the newly acquired company had different logistics infrastructures. The parent company outsourced its logistics operations to a global third-party logistics service provider, while the acquired company managed its transportation planning in-house and ran its operations with common carriers. The companies had their own consolidation/de-consolidation hubs and warehouse, and their suppliers and end customers were in the same geographic regions. After the merger, significant synergies in the two companies’ networks and cost reduction in transportation and logistics were identified, including the following:
- Optimizing the location and number of logistics hubs
- Identifying the right usage of transportation modes (dedicated fleet, common carriers) and transportation service types (truck loads, multi-stop truck loads, and less-than-truck loads)
- Consolidation, hub-consolidation, and zone pooling of equipment
- Optimizing the product mix during transport (temperature-controlled products mixed with non-temperature-controlled products)
- Scope of increase in pick-up time window to aid better consolidation
An in-depth study of the transportation networks of both companies, including their supplier, plant, and hub locations, current flows (product types and volumes shipped across various lanes), and current service levels showed key problem areas and requirements.
The future state transportation network was modeled using optimization techniques that leveraged modeling tools (JDA T-Mod), what-if analyses were conducted on the baseline data, and various cost-savings opportunities were identified through simulations of multiple variables.
Multiple combinations of mode shifts, changes in service types, hub usage, product mix reconfiguration, shipment consolidations (multi- picks and drops and multi-stop truck loads), and time window relaxation (within permissible limits) were analyzed to identify the best possible combinations.
All identified opportunities were then analyzed further in collaboration with the lead logistics service provider. The proposed target model ensured that most critical requirements were addressed and the implementation blueprint was also practical.
The key recommendations included the following:
- Centralization of logistics planning across all the divisions of both companies to uncover potential opportunities across all divisions and flows and effectively apply best practices across all divisions
- Relocation of hubs and reconfiguration of the product mixes to enable better shipment consolidation, at optimal service levels
- Proposed dedicated fleet (without co-loading with other customers) instead of common carrier serviceson lanes with stable volumes, enough truck capacity utilization, and opportunities for round trips from residences to cut transportation costs
- Proposed sophisticated less-than-truckload/truckload mode shifts and hub utilization opportunities, including deconsolidation, consolidation multi-stop pick-ups and deliveries, and zone pooling to improve carrier utilization
- Higher capacity utilization by including non-temperature-controlled shipments with temperature-controlled shipments
The integrated logistics network has reduced logistics costs by up to 25%, by enabling the following:
- Improved collaboration between the merged entity and the lead logistics service provider
- Improved network visibility and service level performance (99% on-time pick-ups and deliveries)
The improved network design and enhanced visibility has led to additional opportunities in adjacent areas, such as freight management, load planning, carrier sourcing, and invoice generation and billing.