Background & Brief
This UK-based trader of ethnic and speciality foods (part of a £13.3bn T/O group) wished to re-confirm the suitability of its logistics infrastructure with an analysis of customer delivery and source supply locations. At the same time, the company was also considering a major acquisition and needed to understand the potential implications on current and future infrastructures.
The project was made up of 3 major phases; Validation of Centre of Gravity, benchmark transport and warehousing costs, and assess the implications of the proposed merger. Our approach was to:
- Carry out an analysis of recent customer transactions by current delivery location
- Model the Centre of Gravity and compare with current infrastructure
- Benchmark transport and warehousing costs – using Scala’s comprehensive cost database
- Re-model using information provided for the proposed merger
- Evaluate the results and provide positive development recommendations
Benefits & Results
The UK Centre of Gravity showed that the potential merger with an external business would have major implications on the optimum location. SCALA’s benchmarking (provided by a range of third party logistics providers) discovered that current rates were well below the market average. Equipped with this crucial knowledge, the company was able to take steps to ensure these rates were safeguarded.
The impact of the potential acquisition on both costs and activity was assessed and quantified. SCALA also identified the potential transport and warehousing cost implications of the merger and enhanced these results with option modelling for different scenarios.
- The potential impact of the merger on transport costs was between 12-18%
- The merger would also permit the closure of 2 distribution centres
- SCALA was retained to carry out a similar exercise for European delivery locations
The company gained a better understanding of the strengths of its current logistics infrastructure and the potential impact of the proposed merger and was thus able to negotiate the acquisition from a position of strength.