High inventory holding period at warehouses decreased profit margins for the manufacturer
The company, one of the leading manufacturers of batteries and inverters, has a manufacturing unit in the northern region of India. It services a whole range of clients from OEMs to consumer and after-market segments. It has a strong network of about 85 warehouses spread across the country that hold inventory material before it is forwarded to its 9,000 dealers.
For all its goods movement, from the manufacturing unit to the warehouses, it utilized full truck load services from various local logistics partners. The high inventory holding time at these intermediary warehouses led to high working capital requirement, damages due to multiple handovers and risk of stock out in remote rural areas. The company wanted to reimagine its supply chain by minimizing their warehouses to improve its profitability and serviceability across the value chain. It faced numerous challenges, specifically.
Logistics partner with technology integration and operational efficiency transforms the company’s distribution model
The company had experience of working with a logistics partner having consistent on-time express delivery capability and easy customer integration solution decided to reimagine its supply chain by fundamentally questioning the high number of warehouses and the use of full-truck loads for its material movement. It also saw the opportunity to make its logistics more efficient in terms of both operations and cost.
Minimizing number of warehouses by switching to part truck load movements
The company decided to structurally improve its efficiency in operations, reduce overall supply chain costs and increase profitability by reimagining its distribution network. The company tied up with single national logistics partner and used its capability of up to 50% faster transit time and largest serviceability of over 29,000 pin-codes. The logistics partner helped the company switch to part-truck loads for material movement from its manufacturing plant directly to dealers, bypassing the need of warehouses.
This reduced inventory holding time from 60 days to 20 days which reduced delays in deliveries further reducing risk of stockout. The company also optimized its distribution network by reducing its previous 85 warehouses to below 40. These changes have improved profitability by 10% across the value-chain. Additionally, by leveraging technology capabilities of its logistics partner, it also increased its resource efficiency by over 45% by generating automatic pickup requests, consignment note, proof of delivery and billing and has complete visibility of material movement to all distribution partners and retail outlets.
Lasting Business Impact
The company was able to improve its profitability by reducing the number of warehouses through the capabilities of its logistics partner. It is now in full control of its material movement to over 9,000 dealers across the country. The business impact brought by this partnership was,
The company has used supply chain as a tool for maximizing profitability by ensuring availability of products and reducing overall logistics cost across the value chain.