Benchmarking of Logistics Contract Rates

Global Branded Grocery Manufacturer

Background & Brief

The client, part of a major global corporation, outsources its UK Warehousing & Distribution logistics arrangements to one LSP. As the initial contract was coming to a close the LSP was advising of significant rate increases across all aspects of the contract amounting to a 15%+ overall increase. SCALA were engaged to ascertain how their rates & costs compared to the market.

Project Approach

  • Data was gathered to establish a full understanding of the logistics arrangements – annual storage profile, inbound & outbound volumes, case picking & 6 months of delivery level distribution data. From this the base level & impact of the proposed rate increase was established.
  • SCALA’s extensive & current data base of market rates was used to establish how the LSP’s current & proposed rates compared. A “blended rate matrix” was used to evaluate the LSP’s distribution matrix.
  • In addition the clients warehousing & distribution costs were compared to SCALA’S annual benchmark to give a comparison as to relative cost competitiveness vs a Grocery manufacturers peer group.
  • A Centre of Gravity analysis was completed to identify where the optimal location would be if the client decided to look at alternative solutions
  • Benefits & Results

  • The evaluation identified that the current rates were in line if not above typical market rates & provided significant insights that enabled the client to enter into meaningful negotiations with the LSP.
  • In addition the Centre of Gravity work identified optimal locations for the client to base any market RFP exercise.
  • The exercise alerted the client as to key features that drive its cost base & that they should be looking to adopt going forward.
  • Final Outcome

    The client has adopted the recommendation to 1/ robustly challenge the proposed rate increases 2/ to complete a targeted market approach.
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