HORIZON INTERNATIONAL CASE STUDY
A leading tier 1 supplier to the
automotive industry

The client has a vendor base in the Far East of +3000 suppliers. They had been with their freight forwarding partner, who operated their core trade lanes, for over 5 years. However, other lanes had become fragmented between a range of providers, primarily due to some vendors using their own preferred forwarders.

Customer Challenge:

Due to the nature of the automotive industry, the client operated a JIT (Just In Time) strategy – by receiving goods only as they are needed for production, they could reduce waste, lower inventory costs and increase efficiency. A JIT strategy demands a high level of visibility and control over an inbound supply chain, as any friction/disruption can lead to delivery deadlines being missed.

‘Automotive OEMs apply heavy penalties onto suppliers in the event of such delays, so hitting deadlines is critical.’

Each purchase order, regardless of size, was shipped independently on a single Housebill of Lading on the next available service – regardless of whether it was one of many orders moving together. The freight forwarder would provide order status visibility through a weekly spreadsheet, which was printed by the client and details re-input manually into their own ERP system.

Due to the lack of control and visibility of their supply chain, the client was unable to accurately maintain a JIT strategy.  This led to them holding excess inventory, negatively impacting their cashflow and NPV (Net Present Value)

With each purchase order moving on its own Housebill of Lading, separate customs clearance, handling and delivery fees were incurred, inflating costs considerably. Whilst orders were consolidated into dedicated containers, these were poorly optimised. Neither the client nor the freight forwarder had any pre-shipment visibility of any orders “coming down the pipe” and whatever happened to be on hand at time of shipping was loaded, often leaving substantial empty space in containers.

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Our Solution:

  • Horizon were invited to participate in the client’s planned RFQ at a late stage. The other candidates had already submitted their initial rate offers.
  • During the first meeting with the client, the issues outlined were discovered by Horizon.
  • Our solution was to introduce multi-vendor assembly; all available orders would be grouped together as a single consignment, reducing costs and simplifying the client’s tracking process.
  • From the moment Purchase Orders were placed with suppliers, they would be imported into hiCloud – Horizon’s cloud-based Supply Chain application. This gave full visibility of all orders in process and in turn, enabled effective load planning and container optimisation. The client now had “virtual warehouse visibility” and could track inventory levels by SKU, even when the good were “on the water”.
  • This detailed information supported their JIT Just in Time Strategy, enabling them to fulfil sales orders accurately and on time.
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Customer Benefit: 

  • By assembling multiple orders together as a single consignment, the client achieved an immediate year-on-year reduction in their freight spend of $400,000 pa.
  • The client has improved their KPI performance and thus avoided OEM penalties, which had previously run into tens of $000’s.
  • Furthermore, the visibility provided by hiCloud enabled effective JIT operation, reducing inventory levels and ultimately freeing up cash flow. It also allows the client to identify poorly performing vendors and where necessary, remove them from their supplier base.
  • The measures we have implemented have increased efficiency throughout their entire supply chain. Our load optimisation alone – shipping more product in fewer containers – resulted in a reduction in overall freight spend of $100,000 pa.
  • hiCloudhas also provided the client with clear vendor KPI measurements – enabling them to identify poor performing vendors and where necessary, removing them from their supply base.
  • The client is on course to realise direct hard dollar savings of $500,000 p.a. through the solutions implemented by Horizon.

The soft dollar savings are also significant – Horizon continues to work with the client to improve their supply chain efficiency and remove unnecessary costs.

 

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