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Distribution strategy

Air France-KLM Cargo

Improvement and sourcing of the European trucking network resulting in a decrease in annual spend

Improvement and sourcing of the European trucking network resulting in a decrease in annual spend

What they asked

Our client, a large European cargo airline, requested a distribution strategy to lower the cost of its European feeder network. The cargo airline subcontracts specialised trucking companies via FTL and LTL contracts to collect and distribute air cargo to and from European customers. The network covers multiple daily connections to all major airports across Northern, Western and Central Europe. A renewed distribution strategy and supporting contracts with the trucking companies should result in a significant reduction of external cost.

What we did

We followed two parallel tracks, one for sourcing and one for network improvement. We modelled the client’s feeder network, establishing detailed tour profiles and we split the costs involved for each individual lane. We determined the ‘should-be cost’ for each lane based on individual cost drivers such as fuel, labour, equipment and toll. These cost levels were used to support the negotiations with all suppliers. In parallel, we developed new strategies to combine flows, enable co-loading, optimise the network, improve processes and planning, and improve load factors.

What we accomplished

The sourcing track has resulted in a significant reduction of the trucking rates as new contracts with trucking companies were implemented. The other measures taken have resulted in reduced truck movements and higher load factors, which lead to a further reduction of the trucking costs. Meanwhile, service levels were safeguarded or even improved on some lanes.

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