Fixed Price per Car
11th August 2010
With a fixed price contract the customer knows exactly what they will be paying over a given period for a specified volume – but who does this benefit, and why?
What happens if the volumes are less?
If the automotive manufacturer experiences a reduced volume to that predicted it could result in them ‘over-paying’ for the services of their logistics provider compared to a variable activity based agreement.
How does the 3pl arrive at the price and continue to improve service levels?
The challenge for any production logistics provider asked to deliver a contractually agreed figure for an ‘all-in’ price is that it is based upon a whole scope of logistics requirements. However, the real question should be; in providing a fixed price, how does the logistics provider continue to achieve increased productivity, maintain or increase quality of service, whilst streamlining the workforce to deliver their shareholders greater profitability?
How does the 3pl protect their margin?
Where the 3pl company has a greater remit than the ‘on-site’ production logistics, it may be that inefficiency is hidden across several areas of the service being provided. The automotive manufacture is focused on the ‘fixed-price’ agreed and often isn’t aware of the direct costs they pay, through this loss of efficiency elsewhere. The 3pl must make money from the arrangement and if they have got it wrong they will let service slip to protect margin.
How can automotive manufacturers get fixed costs and greater efficiency?
Because Rudolph and Hellmann Automotive only provide ‘on-site’ logistics within the vehicle manufacturing sector in the UK, they have the best people in the industry. These handpicked people have a team of specialists focused entirely on automotive manufacturing processes to call upon. There isn’t any other element of the contract, like transport or warehousing to hide, so inefficiency isn’t an option.
Micro KPI’s not Macro KPI’s
With expertise and experience comes measurement, and the ability to dynamically change the process, manning, or focus for improvement. No other automotive manufacturing 3pl works this way, with KPI’s assessed and acted upon every 15 minutes, waste is driven out or effectiveness improved four times an hour.
Fixed price works if the arrangement is focused
If you are considering adopting a ‘fixed price per car’ make sure the price you pay isn’t at the cost of continued improvement, quality and ultimately profitability.
Here’s how the 360 onsite logistics audit and assessment works!
Put us to the test, what have you got to lose?
Contact us for a FREE ‘on site' logistics audit – carried out under a non disclosure agreement - our findings will be reported in full confidence and will provide a detailed analysis of where savings and improvements can be made.
There’s only one condition - you must be UK based and be operating in the automotive sector, with a head count of around 25 - 30 or more operating in logistics roles.