Context

Our client, a market leading supplier of natural medicines in Australia and New Zealand, was losing market share in their key sales channels. Specifically, the client was concerned that their legacy trading terms had led to:

  • Excessive warehousing and distribution costs due to a ‘one-size-fit-all’ delivery model
  • Discount structures not aligned with their customer segmentation and the broader competitive landscape

PIP was initially engaged to diagnose savings potential in the client’s Australian warehousing and distribution operation. Given the intimate link between distribution and trading terms, PIP’s scope was expanded to mode and new customer segmentations and recommendation on discount structures and service suites that would recapture market share.

Client achieved

  • An ideas pipeline identifying a 37% reduction in distribution costs and 29% reduction in warehousing costs
  • 50% of idea value in quick-wins (21% of baseline spend) by:
    • Aligning delivery method with delivery timeframe (air versus trucking)
    • Phasing major account payment terms to load-level warehousing demand
    • Increasing freight recoveries through increasing minimum spend requirements and freight charges
    • Consolidating point-of-sale (POS) distribution
  • Recommended various tiered discount structures to increase market share and gross profit, with limited business risk

The Results