International logistics procurement strategy

Client Background

• Retailer with a volume of c 20,000 teu of maritime freight per annum sourced predominantly from India, Bangladesh, China and Asian countries.
• Requires extensive purchase order and shipping order management at origin.
• High levels of visibility required in supply chain.
• Marks & Spencer had traditionally sourced merchandise predominantly from UK suppliers. To remain competitive these suppliers switched to overseas production but retained control of shipping and supply chain functions on CIF terms delivery to M&S.

Objectives and Tasks

• M&S sought to gain control of their supply chain for cost and operational performance reasons but had limited or no relationships with carriers and forwarders.
• Assistance was required in determining the potential benefits from moving to FOB terms, building contacts with potential forwarders and carriers and with initial negotiations for ocean freight .
• The possibility of direct contracts with carriers for the first time needed to be assessed.
• The business risk in transferring buying terms to FOB and taking control of logistics had to be taken into account and assessed.

Drewry Approach

Drewry assigned an experienced, supply chain consultant located in Europe. Entirely independent of carrier and forwarder ownership or influence, our consultants had first hand knowledge through previously being managers within shipping lines and international 3PL providers

• Participation in internal discussions determining the strategic benefits of moving to FOB shipment including advice on potential value added gains.
• Advise on the carrier versus forwarder implications for purchase order and shipping management.
• Drewry advised on potential carriers best positioned to handle Marks & Spencer requirement. Contact points were recommended.
• Drewry assisted in the preparation of the RFQ for the tender process
• Drewry joined M&S managers in the initial negotiation team interviews with carriers and forwarders, Advising on tactics and interpreting negotiation positions.
• Drewry participated in post negotiation appraisal.

Results Achieved

• In the initial year about 30% of M&S volume was transferred to FOB shipment with order process control split between two main logistics suppliers to avoid over-dependence.
• Subsequently more than 80% was shifted to M&S direct contracts with carriers. We believe that M&S moved from having some of the highest industry shipping costs to the lowest competitive quadrant