Castrol intervention allows for over $120k increased growth potential
How SmartGains support from Castrol logistics specialists allowed our Namibian distributor to maximize efficiency and improve performance.
The problem: inefficient historic supply method
Castrol’s marine distributor in Namibia is served by Castrol SouthAfrica (SA). Historically, containers of stock are shipped fromSA to Namibia. However, this process is hindered by frequentdelays due to port congestion and changing sailings. This in turnleads to excessive delays in supply of up to 30 days. In addition,because customs documents had to be prepared for thedistributor, orders were restricted to an average of 14,000L percontainer (around two containers). All of these factors increasedcosts – both to the customer, for the lubricant, and time/costsinternally for Castrol.
The results: $0.024/l reduction in costs and potential
for more deliveries
A trial was instigated to great success. Road haulage reducedtransit time from up to 30 days to five days, improving theavailability of supply to customers. In addition, an averagetruckload volume of 35,600L allows for 25% more product to bedelivered, thus reducing the $ per litre. Orders can be dispatchedas soon as ready, removing the need to stack product untilfreight space and sailing is available.
Although annual logistics costs are higher with road haulage, thecost per litre is reduced from $0.147 to $0.123 due to the highervolume delivered. More frequent deliveries at a higher volumeenhances performance as well as allowing the distributor togrow their capacity.
By removing complexity from processes and documentationpreparation, as well as allowing consolidation of multiple orders,we have streamlined and optimized supply in a way that benefitsthe operations of both the distributor and Castrol
The Castrol solution: SmartGains logistics model
Our logistics specialists liaised with the distributor to change the supply model from sea freight to road haulage, with the distributor arranging road transport direct from SA. A compulsory vehicle checklist was obtained to allow vehicles onto Castrol sites in order to pick up the product. This new model also involved the distributor processing their own customs documentation, as they would be taking responsibility for theload once it left our site.
The figures: SmartGains achieved
| SMARTGAINS AREA | SAVINGS | COST TO CUSTOMER TOIMPLEMENT CHANGE | CREATED VALUEPER YEAR |
|---|---|---|---|
| *** Removal of sea freight costs from Castrol invoice | Sea freight 4 containers every month @ $2061/container(4 x 12 x $2061 = $98,928) | $98,928 | |
| *** Increased direct cost to distributor forarranging own road haulage | Road haulage 2 x trucks per month @ $4333/truck(2 x 12 x $4333) | $103,992 | -$103,992 |
| *** Increased cost to distributor forarranging customs documentation | 24 trucks per year at $50 per truck = $1200 | $1,200 | -$1,200 |
| ** Potential to source more product from same number of Castrol deliveries allows growth as greater capacity tosupply their customers | Potential for 25% more volume if same number of scheduled deliveries 7,600L more per delivery, 24 deliveries per year@ $0.5/L profit for distributor | $91,200 | |
| * Potential to increase number of deliveries per year because of shorter transit times and higher volume perdelivery increases potential for growth | Shorter delivery time allows 2 extra deliveries of 35,600L/yearwith distributor profit @ $0.50/L | $35,600 | |
| SMARTGAINS Total | $120,536 | ||