Optimizing Expedited Logistic Costs in the MedTech Industry
Increasing cost-efficiency for courier, express, and parcel without measurable lead-time changes
Our client is a global MedTech company specializing in the production of advanced medical imaging equipment. With sales of over 5 billion euros, the company stands as a major player in the medical technology industry.
MedTech
Objective: Optimize courier, express and parcel model without disrupting day-to-day logistics operations
The project was initiated to achieve a significant improvement in indirect spend, targeting over 20 million euros in savings. KGM Strategy’s mandate was to identify optimization potential and realize substantial savings in the largest indirect spend categories. The Courier, Express and Parcel (CEP) spend, approximately 50 million euros, was identified as crucial for achieving this ambitious savings target. Additionally, the project aimed to critically assess the diverse global supplier landscape and transition service levels, previously unmonitored by procurement, to a demand-based model.
The goals defined for the CEP initiative were ambitious. Firstly, the client aimed for a CEP savings target of 5 million euros, representing 10% of the total spend. Secondly, the CEP initiative aimed to critically assess the diverse global supplier landscape and transition to a demand-based model with control over service levels, previously unmonitored by procurement. Furthermore, the project intended to introduce competition and consolidate the supplier portfolio globally, eliminating reliance on local suppliers.
Approach: Data transparency, demand management and committed logistics stakeholders
The case team began by conducting a detailed analysis of the CEP market, focusing on the advanced MedTech sector, and held expert interviews with industry leaders. Our consultants thoroughly analyzed the client’s CEP provider contracts and specifications across different regions, uncovering a lack of global consolidation and data transparency. To address this, we requested past shipment data at the lane level from each supplier in each region, achieving transparency over more than 2 million shipments across 50,000 lanes. This detailed shipment data allowed us to develop initial savings hypotheses, identifying high-runner lanes and unfavorable weight classes, and quantifying potential service level shifts.
Internally, we developed and quantified demand management levers in terms of service level changes and savings impact. We leveraged KGM Strategy’s Data Insights teams to visualize data and potential levers using PowerBI, facilitating decision-making for the client’s management team. Regional logistic workshops were organized to secure approval for service level adjustments, necessary due to the decision-making authority residing outside procurement. A key demand lever was transport mode optimization on selected high-runner routes, shifting from Express to Standard delivery. This optimization resulted in approximately 1 million euros in savings without significant changes in delivery time.
For the Request for Quotation (RfQ) execution, we designed a region-specific tender allowing suppliers to offer global add-on potentials for cross-regional nominations, addressing the client’s inability to commit to a global supplier nomination. We harmonized shipping data and standardized RfQ templates to enable lane-level supplier offers, capturing savings effects and determining the best price for each lane. The tender setup included all commercial factors such as rates, discount levels, fuel surcharges, and DIM factors, expanding the negotiation scope and allowing for multiple angles. Supplier communication and meetings were prepared to emphasize the competitive nature of the tender and the client’s willingness to consolidate the supply base globally.
This case was another proof of, how crucial and supportive superior data transparency is to reduce resistance from logistics stakeholders regarding service level adjustments. Data-backed insights demonstrated that changes on selected lanes would not lead to longer lead times, enabling significant quick wins. Substantial savings were achieved with incumbent suppliers through competitive pressure and data transparency, without disrupting day-to-day logistics operations. Based on project learnings, the client is preparing its next tender to further improve commercial conditions.
Results:
KGM Strategy’s comprehensive approach enabled the client to achieve significant cost reductions while maintaining the efficiency and reliability of their logistics operations
- Total savings of over € 6 million
- Demand management savings of € 1.5 million without measurable lead time changes
- Enhancement of supplier relationships and introduction of competitive supplier portfolio
- Establishment of long-term savings potential through regional onboarding of global suppliers
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