Challenge

A large global logistics company was experiencing bottom line pressure in the face of increased competition. Cost and price varied greatly across trade lanes and customers. Profitability also differed widely across container loads. The client was looking to maximize customer profitability at a container level to strengthen the bottom line.

Approach

A customer segmentation exercise helped understand characteristics of profitable customers and shipments (based on shipment type, package size, value-added services, source and destination ports, seasonality, customer's historical shipping patterns etc.). Insights from the segmentation guided a targeting model to help prioritize the best customers for a particular container in a particular route given available container space. While the prototype roll out of the targeting model was in Excel sheets, a parallel effort was undertaken to revamp the internal sales productivity software application. The software was modified to allow the sales management to select customers based on the underlying model and simulate profitability scenarios at various price points.

Outcome

The container profitability across the top 20 trade lanes for the company increased by 10% over the first six months of operational roll out. This translated to a bottom line increase of $2.5 increase in yield (profitability per cubic feet) for these trade lanes. The guidance on the most appropriate customers for a shipment also helped the sales weed out the bottom 10% unprofitable customers.