Decreasing global costs of transportation between inter-group locations : Case: Outotec, Spare part business

Abstract

The subject of the thesis was to find out ways how the case company Outotec can decrease the global costs of transportation of spare part deliveries between inter-group locations. The main research question was how can Outotec decrease global costs of transportation between inter-group locations? In order to answer the main research question the current situation of the transportation arrangements and costs needed to be studied. Hence the sub research question became: what is the current situation of Outotec’s transportation arrangements and costs between Outotec inter-group locations?

The research was carried out by using qualitative research method with the support of pre-gathered quantitative material. The thesis is a part of a larger development project for Outotec’s spare part business led by a consultant company. The consultant company gathered the basic information of Outotec’s annual sales order lines which was then used as a basis for finding out the main transportation routes between Outotec locations. The information of the main routes was specified in more detail by open email queries to logistics persons working at different Outotec locations. As a result a 12 sheet excel sheet matrix was gathered from the main transportation routes between Outotec locations containing the information of sales order lines, delivery terms and forwarders used, total kilograms delivered by transportation modes, current transportation costs per unit by transportation modes and comparisons of transportation costs per unit by forwarder and transportation mode.

The research showed that the delivery arrangements between Outotec inter-group locations are uncoordinated and there are overlapping functions. Therefore the costs of transportation are higher than they could be. Three main problems increasing the costs of transportation were defined. There are no global contracts with the forwarders, the use of airfreight and express deliveries is too extensive and there is no cooperation in delivery arrangements between Outotec locations. All the locations basically use their own transportation services and delivery terms. In order to improve the situation Outotec should choose global centralized partners for transportation and make long term contracts. The use of airfreight and express deliveries should be decreased by better stock planning and the cooperation in transportation arrangements between Outotec locations should be started by agreeing on common rules and delivery terms and by consolidating deliveries.