Overview
A regional retailer, moving $1.6B in product through 5 separate 3PL locations to their stores, wanted to better understand how their supply chain program measured against companies with similar profiles and footprints.
$6M+
Immediate Cost Savings
6
Categories of Indirect Spend Reviewed
Challenge
The retailer’s service levels were far below where they needed to be. Fill rates were below acceptable standards, damage claims often went unpaid, and delivery costs were rising. The contracts were structured heavily in favor of the service providers.
Approach
The PRGX Contract Management services team did a deep dive into all the associated contracts focusing on the key areas of failure. A rigorous overview of the clause language showed there were significant opportunities for contract optimization. Contracts contained suboptimal language that allowed vendors to not be held accountable for low fill rates, missed shipments or damaged products.
A combination of Subject Matter Experts (SMEs) and our vast market intelligence were used to develop optimized terms and conditions that provided the client with proper levels of protection and recourse. Further, the team was able to adjust rate structures and payment terms to be more in line with the market, improving cost efficiencies.
Results
- Identified $6M+ in immediate cost savings through cost per case handling fee reduction.
- Implemented SLAs including penalties for missed service levels resulting in increased fill and accuracy rates.
- Restructured product shipment damage language eliminating acceptable damage levels, thereby creating a program that reimbursed for actual damages.
Key Takeaways:
- Service agreement including sound and measurable SLA language, inclusive of penalties, increases vendor accountability and performance.
- Current market intelligence in the hands of the proper subject matter experts will drive significant cost improvements.
- Agreements that are not regularly reviewed and analyzed lead to cost leakage.
Key Spend Categories: Logistics, Facilities, Technology, Temp Labor, Outsourced Services, Construction
Streamline Your Most Complex Supplier Spend with PRGX Contract Management
The PRGX Contract Management team is ready to help you gain greater visibility and insight into contract details and address systemic errors, ensuring immediate cash recoveries and long-term cost savings. Just in the past year, PRGX has analyzed $2.3T client spend with $2.3B client revenue across industries and services, yielding 10x average ROI. Chat with our team of experts about your unique goals and or watch a demo to see our solutions in action.
How Much Can You Recover?
Take a look at our services and solutions, backed by serious analytics.
