Case Study – Indirect Cost Calculator

SELLING INDIRECT COST CALCULATOR TO OWNER/SENIOR MANAGER

The client is a well-known distributor of skateboards and apparel throughout Canada to major retailers. The complex supply chain included inbound freight consisting of a wide array of products coming in from Asia Pacific and California and outbound freight that ships to retailers all across Canada.

Supply Chain Management Challenge:

The client’s previous logistics provider (ocean, customs, and trucking) had worked with them for many years. Although they had a strong understanding of the client’s overall supply chain, the client did not sense that they were getting any additional value or remarkable customer service. Management had never taken a closer look at their overall transportation spend to determine if they were getting good value. The transportation related tasks were primarily handled by the Junior Accountants and the Warehouse manager, neither of whom had any formal training in the transportation and logistics. A large portion of their workday was spent managing the tasks associated with shipping their products.

Supply Chain Management Goal:

• To analyze the overall transportation costs across all modes of transport and to generate an audit to uncover any unrealized cost savings.
• To follow up the audit with an Indirect Supply Chain Cost Calculator, illustrating to the Owner and CFO the time and labour that their employees were currently spending managing the supply chain activities.
• To outsource supply chain management to allow employees to focus on other revenue generating activities in the company.

Supply Chain Management Result:

MC Freight was able to do a comprehensive Freight Audit on their overall transportations costs and found savings of $74,700 per year. At the same time, MC Freight found a savings of $10,670 on the client’s labour costs. It was obvious that there was substantial time being spent on transportation and logistics related activities. The time that the Junior Accountant and Warehouse Manager was spending on various activities was able to be put into different functions that were deemed necessary from the company. This saved the customer in the long run by avoiding the need to hire additional staff to take care of these functions.