When you are scaling fast in D2C, brands often face one of 2 problems: they see cracks in their customer service or find themselves significantly overspending. This D2C brand suspected they were suffering from both.
Nought to £5m in just 4 years
This is the story of one of the UK’s fastest growing frozen direct to consumer food companies. Since launch 4 years ago, they have grown more than 100% year on year and expect to double in size each year for the next 3 years. Like all great brands, they operate customer-first and expect 99.5% delivery success (99.9% pick success). In a business growing that quickly, this standard is achievable but certainly requires a focus.
Cracks forming with costs and OTIF suffering
They approached us with their supply chain in a precarious position. They were experiencing service quality had dropped closer to 95% and they had concerns that costs were leaking at the 3PL due to inefficiencies in the pick and pack operation.
They wanted to run a tender of the market but with the business growing so quickly, the team simply did not have the capacity to do this themselves.
At the same time, they were nervous that if their existing provider caught wind of their tender, it could damage the relationship and so there was a safety value in using a third party that they could never replicate internally.
“We have this concern in the back of our minds but we just do not have the capacity to deal with it. We are also so reliant on this provider that we cannot let them know this is happening.”
A ‘stealth tender’ to rebase commercials
The brand engaged YF to run a ‘stealth tender’ on their behalf – as an independent party we were able to find them answers without ever revealing the identity of the brand.
They spent time with our supply chain team so we could represent them externally with confidence. They also used this time to gain insight into the state of the market (at the time, the frozen storage market was swollen due to COVID and Brexit stockpiling).
Our deep understanding of the brand and the market enabled our team to screen a longlist of 60 best-fit providers to 14 that were worth putting through a formal tender. From there, we progressed 3 providers through to the advanced stages of the tender process including interviews and commercial assessments.
Confidence in their options
Most 3PLs working in the D2C space started off as traditional pallet in / pallet out operations and have only recently pivoted to D2C. Or on the other side of the coin there are pick & pack fulfilment houses who are generally low volume players. It was fair to say that in this market compromises would have to be made somewhere – the most important thing is that the brand gets advice on where to make them.
The result for the brand was a detailed report of the key players in the market with their commercial, operational and technical pros and cons. Down to the specific warehouses we would move them to, we gave the brand a good sense of their current 3PL’s performance and pricing in the context of the broader market. Among the options was one that we negotiated to achieve a saving of £400k per year as well as having some clear operational benefits.
The brand then used this insight to provide leverage in their conversations and ultimately drive significant improvements over the following 3 months.
3 Things To Take Away
1. Regular tendering is very important when you are high growth
2. The sooner you run these processes, the more profit you make in the year
3. Stealth is a valuable asset when negotiating
“We simply could not do this without you.”
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