Optimization of the Global Logistic Network
for Leading Manufacturer of Specialty Chemicals and Gases
A leading manufacturer of specialty chemicals and gases for the semiconductor industry was seeking a lead logistics provider who could help it to consolidate and reduce costs associated with its expanding global logistics network. As this manufacturer continued to increase in size, it realized that effective management of logistics activity would require substantial investment and potentially divert resources away from its core competencies. Partnership with a capable logistics provider would provide access to world-class systems, processes and expertise at a fraction of what would be spent to acquire these capabilities internally. This manufacturer also desired a partner with chemical management expertise who could meet its specialized storage and transport requirements and ensure compliance with all applicable regulations associated with the management of regulated chemicals and gases.
During their initial engagement, Rinchem worked with this specialty chemical and gas manufacturer to evaluate logistics related costs, modes of transport, capacity utilization levels, supplier coordination and order fulfillment performance levels to identify strategies for improvement. Gains in efficiency and cost reduction were then tracked through jointly developed key performance measures established to monitor the health and performance of the manufacturer’s global distribution network. Through continuous improvement efforts and jointly-established performance incentives, Rinchem began to help construct a flexible, responsive and low-cost distribution model.
Rinchem was able to reduce distribution network cost through (1) utilization of customized Rinchem warehousing and transportation assets, (2) shared transportation and warehousing costs with other similar chemical and gas manufacturers, (3) access to Rinchem’s volume-based purchasing power, (4) optimization of shipments through coordination and consolidation of shipments, and (5) meticulous freight invoicing auditing to ensure that the manufacturer was not overbilled.
Rinchem’s customized transportation assets and specialized permits with regard to the transport of “Zone A” gases allowed it to transport those gases more cheaply and efficiently for this manufacturer in certain lanes. Rinchem’s ability to safely store and handle flammable and poisonous gases in gas bunkers and depots located at facilities across the country and internationally also negated the need for this manufacturer to invest large amounts of capital to develop such assets itself. Rinchem also utilized advanced gas detection systems, as well as security and redundant temperature-control systems to ensure that all materials were stored according to exact storage specifications.
Through use of Rinchem warehousing solutions, this manufacturer was able to convert from a fixed to a variable-based logistics cost model, paying only for the storage space that it needed. Rinchem was also able to diffuse gas bunker and depot costs by allocating those costs across other similar customers who utilized the same warehousing space. Rinchem’s broad geographic footprint and ability to store and transport specialty gases both over the road and for local delivery helped this manufacturer to more cost effectively target and distribute products into new markets without significant capital outlay.
This manufacturer was able to extensively utilize Rinchem’s relationships with and knowledge of pricing regarding key service providers within the logistics industry. Rinchem was able to help find low-cost, quality providers in key lanes quickly and efficiently through Rinchem-managed systems built for just that purpose. This manufacturer also leveraged Rinchem’s volume-based purchasing power with key LTL providers to obtain rock-bottom shipment rates and substantially reduce LTL shipping costs.
Rinchem utilized its Chem-Star shipment optimization systems and load consolidation expertise to consolidate LTL shipments, coordinate shipments with backhauls from other locations and substantially improve utilization of transportation assets. Finally, Rinchem audited logistics provider billing, identifying and resolving errors and overbillings that reduced transportation costs.
Through access to world-class logistic systems, visibility and expertise, Rinchem was also able to streamline logistics management activities so that this manufacturer’s logistics managers were empowered to focus upon more strategic activities and analysis, versus shepherding tactical, day-to-day logistics execution.
After four years of partnership and continuous improvement activities, a study was commissioned involving other chemical and gas manufacturers within the semiconductor industry relating to logistics cost. Of all corporations surveyed, this specialty chemical and gas manufacturer recorded the lowest overall cost of logistics, as it related to the total cost of the chemical. Its logistics cost represented 4.50 percent of total chemical cost, while the industry average was 5.55 percent. With regard to perfect fulfillment of orders according to the perfect order index (right product, quantity, time, place, condition and paperwork), this manufacturer also ranked very close to the top of those surveyed.