Wholesaler and logistics provider 2

Delivery charges

Summary

The sector this company works in is subject to governmental regulation, which is changing. To address the challenges posed by forthcoming decisions, our client launched a project to review the delivery charges for its customers, to reduce the impact of the potential uncertainty and possible outcomes. LCP worked with the client to develop solutions, with several scenarios assessed and reviewed.

Project Background

Our client, a leading wholesale business in the UK, was anticipating major changes from a forthcoming regulatory decision to alter the competitive position of their marketplace. This decision was likely to increase competition and put pressure on their delivery charges and profitability.

The client launched a project with LCP to identify the opportunities and threats related to delivery charges, from a range of possible outcomes. The project also included reviewing the minimum delivery charges to make the client more competitive. The new delivery charges needed to meet a number of criteria, including being related to the existing charging mechanism, raising more money overall and having an understandable and justifiable logic.

This project presented a number of complexities in terms of the size and variability of the customer base. Additionally, the new charging structure needed to decrease the gap between delivery costs and charges whilst increasing the competitiveness of the charges for some higher profile customers

Approach

To undertake this project LCP defined 4 work streams:

1. Data analysis of the current delivery charge income stream and competitor analysis of the delivery charges

2. Modelling of various scenarios to analyse what the implications for defined customer groups with each template suggestion would be

3. Research and analysis of customers paying special charges instead of charges according to the standard structure

4. Strengths, weaknesses, opportunities and threats of the recommended structure versus the current situation

The project defined a new charging structure which met all the criteria the client required.

Client Testimonials

As a result of this piece of work LCP has assisted with a similar study relating to the potential acquisition of new business in a specific geographical area and has been selected to carry out follow on projects.

Success Factors

LCP provided the client with a dynamic tool that can be used to test further scenarios.

Results and Benefits

A number of improvement opportunities were identified and quantified as part of this project, these included:

- Increased delivery charge income by ~5%

- Reduction of the charges for the high profile customers by ~2%

- Identified mechanisms to incentivise smaller customers to order more

- Standardisation of additional charges and approaches for additional services