In the world of cross-border supply chains, international and multi-modal logistic routes and long lead times pose significant risks and challenges to the owner of material in transit. Capital locked up in current assets limit the cash velocity and working capital pressure prevents any meaningful bulk buying.
A Tier 1 automotive supplier in Germany, delivers different automotive components to a large OEM in South Africa. The customer operates on a just-in-time manufacturing basis, so the Tier 1 must deliver the component reliably, consistently and on time. This meant for the Tier 1 that logistics storage at the port is necessary to ensure on time delivery. Further, as the goods had to be exported, additional workload was created for the tax and supply chain departments.
In response to these needs, BTI provided a tailor-made solution and stepped into an offtake agreement with the Tier 1 in Germany. All orders of the South African customer were routed through a BTI company which in turn ordered the goods with the Tier 1. Upon release of the goods from the plant, BTI pays the Tier 1 the full sum of the invoice. The components are delivered into a BTI warehouse at the port of departure and consolidated per the customers’ requirements.
In parallel due to BTI´s existing high freight volumes and the possibility to reduce the number of transports by decreasing the delivery frequency, it was possible to reduce the proposed freight costs, bringing windfall profits to the Tier 1.
On arrival in South Africa the components are transported to a warehouse close to the customers premises. There the components are buffered, which enables BTI to support slight fluctuations in demand on short notice flexibly and helped in reducing the inbound delivery frequency. The customer only receives the invoice for the goods once they are being delivered from the warehouse, ensuring a maximum of asset reduction.
Compared to the proposed Tier 1 in-house solution, the BTI solution was not only more cost effective but also safer from a supply chain point of view. All BTI fees were countered by freight cost reductions, leading to essentially free deleveraging of the balance sheet. At the same time, buffer stocks were increased, leading to a higher on time delivery and educed expedited freight cost.
Taking advantage of bulk
buying benefits without increasing working capital
Bringing tools on balance
only when they start generating contribution