Reducing costs and emissions while improving service levels
A Nordic grocery retailer operating around 500 stores wanted to evaluate a new nationwide distribution setup for store replenishment and e-commerce operations, including home delivery and click-and-collect.
The client wanted to reduce carbon emissions, lower transportation costs and improve service levels through more frequent store deliveries. However, their existing setup posed several challenges. The retailer had limited control over transportation and logistics and relied heavily on third-party logistics (3PL) providers.
E-commerce delivery times were also too long, delaying parts of the assortment. In addition, click-and-collect operations were costly due to manual order fulfillment in a central warehouse.
Building a fact-based model to evaluate future scenarios
We worked closely with the client to assess future logistics scenarios. A multidisciplinary team of supply chain experts, financial analysts and organizational specialists collaborated with the client’s team throughout the engagement.
The client had already identified three potential supply chain scenarios. The initial phase focused on validating assumptions, aligning on expected outcomes and identifying areas requiring further analysis.
We developed a financial model incorporating costs, delivery times, carbon emissions and service levels across the network. The model enabled scenario simulations based on future volumes and key variables such as vehicle types, routing, trip frequency and fuel choices.
Together with the client, we engaged external experts to estimate capital expenditures for warehouse infrastructure, including land, buildings and automation solutions. In parallel, we also assessed organizational impacts, labor considerations, transition planning and risks.
Designing an optimized and more controlled distribution network
Based on delivery requirements, we proposed an optimized warehouse and distribution structure. This included recommendations on the number and location of warehouses, the role of cross-docking sites and the overall operating model.
The recommended setup featured a new central warehouse dedicated to bulk store deliveries, alongside an adjacent fully automatic facility for e-commerce order processing. High volume products would bypass the central warehouse and be routed directly to approximately 20 crossdocking sites for final delivery to stores.
The outcomes: Improving service, reducing costs and lowering carbon emissions
The proposed model gives the client greater control of its supply chain while enabling more frequent store deliveries, leading to improved service levels, higher customer satisfaction and increased sales.
Optimized routing and improved vehicle utilization are expected to reduce both transportation costs and carbon emissions, even without changes to fuel types.
Despite requiring significant capital expenditure investment, the solution delivers strong long-term value. Leveraging CGI’s supply chain expertise and a robust financial model, a comprehensive, fact-based report was presented to the client’s board.
The client is now implementing new ways of working and collaborating with external stakeholders to realize these benefits while managing infrastructure investments effectively.
