Healthcare Client

Cost savings for freight services

Background 

A major private equity owned Australian pharmaceutical manufacturer approached ADR to evaluate and improve purchasing in their business. Their purchase categories include international and domestic freight services made up of air freight, sea freight, courier, clearing and forwarding. 
 
Aims
ADR’s objective was to develop a strategic procurement strategy to reduce freight service costs in the short term and help ensure that these gains were maintained in the long term. 
 
Project 
ADR’s first step was to perform detailed analysis of existing procurement practices across their indirect spend categories. It soon became clear that the freight services market had not been competitively tested for some time, with current suppliers firmly entrenched in the business having secured preferred status, often for several years. 
 
ADR’s market analysis also revealed that the freight services market was competitive and that many suppliers were able to provide services across several freight sub categories. 
 
From this analysis, ADR indentified the opportunity to consolidate all freight service sub categories under one freight RFP and issue this to the supply market. 
 
The competitive nature of the market also allowed ADR to develop a strong supplier conditioning strategy and insist upon several contracted measures to ensure continuous improvement in the long term. 
 
Results 
ADR selected two suppliers to provide all freight services – one for domestic and one for international. Contract conditions for these suppliers included the requirement that they provide monthly management information on volumes and costs. This allowed the client to push for continuous improvement against performance-based agreements. 
 
An overall cost reduction of 32% was achieved.
Client
Healthcare Client
Service Area
Diagnostics & Advisory
Industry
Healthcare
Objectives
Cost savings for freight services
Outcome
International Air & Sea Freight Savings A$345,000 (35%) Domestic Freight & Courier Savings A$105,599 (28%) Total Potential Savings A$450,599 (32%)
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