Cost Savings through Improved Service

Learning Company turns to ALOM for on-time fulfillment:

A company outsourcing its order fulfillment to an ALOM competitor was experiencing significant problems with delays and inaccuracies in orders. They approached ALOM to take over all fulfillment activities.

The company, specializing in software used for training materials in schools, was having serious delivery issues, mainly with materials not showing up in time for important presentations.

The lack of confidence with the previous fulfillment company was very telling. Field reps from ALOM’s new client were so desperate in getting the training software in time to classrooms they went to such extreme measures as overnighting materials for a class that was three weeks away. Even so, the expectation and fear would still be that the order would not arrive in time. Follow-up costs were significant with one person essentially working full-time fielding complaints, which proved to be expensive.

Once the field reps were confident that they would receive the materials in time, they would use cheaper freight methods, and this, in turn would drive down freight cost.

ALOM's first priority to their new customer was to establish the confidence that the orders would ship in a timely manner.

When ALOM started receiving orders, it was clear that the freight cost per order was extremely high. Forty-seven percent of all orders were shipped via expedited freight methods. A stunning number of special delivery requests, such as Saturday and early morning delivery were the norm, which brought the average per-item freight charge to a whopping $1.18. The average cost for fulfillment services per item was $0.31.

Gaining the Customer’s Confidence

ALOM immediately set out to change the expectations. Over the next few months, ALOM reestablished the confidence that orders would be shipped the same day as placed. The percentage of overnight and expedited orders dropped dramatically. Five months later, the freight cost was down to $0.397 per item. This represented a drop of 66 percent in freight cost, and a drop from $1.49 in combined freight and fulfillment at the project start to a combined cost of $0.707.

The next goal of ALOM was to drive the freight cost down even further, by an additional 33%. The customer was presented with freight costs broken down on destination, including order detail. ALOM also provided a shipping simulation to illustrate savings if the orders going via expedited ship-methods had been shipped via ground services. This allowed the customer to present the data to each region and each manager for review. Each manager was also presented with data showing on-time shipment.

Hands-on Reporting Saves Money

Within a year, the per item freight cost went down to $0.24, contributing significantly to turning this public company profitable. At the same time, orders arrived on time, enabling field reps to focus on representing the product, rather than customer complaints and shipping problems.

Over the following three years, the freight cost further dropped to $0.21 per item, in spite of ongoing additional increases in gas prices and subsequent increases from couriers. The freight savings realized through this program now contributes between 5% and 10% of the company’s profitability.

The per-item fulfillment charges also decreased due to continued process improvements by ALOM. For instance, ALOM suggested bundling certain products into 25 or more, which made it easier for ALOM to ship and gave the client lower cost by improving their process.

First month

Six months

Following year

After five years

Freight cost per item

$1.18

$0.397

$0.24

$0.21

Customer’s cost handling complaints and follow-up

$6,000/month (estimate) plus field rep time

Eliminated

Notes: Domestic orders only. Cost does not include product cost, storage and certain other incidental costs. All cost specific to this particular customer.

The ALOM Difference

Helping the customer with spiraling freight costs and developing a solution to ensure their crucial packages arrived at training sessions on time is typical of the way ALOM works.

ALOM analyzes each project and customers’ needs carefully and develops a solution that ensures each project is done correctly and meets deadline. Because ALOM’s processes hold up under extreme pressure, they achieve high quality levels in all areas of their operation.

ALOM is committed to supporting customers in reaching their goals as a company. Contact ALOM for more information on how they can help your company.