Korber Vera Bradley Case Study

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The Cost Model Körber's proprietary cost model provides the most robust, granular and inclusive cost analysis in the industry. All factors affecting parcel costs are incorporated and accounted for within the model at the package level. Project Körber performed a benchmarking analysis to compare Vera Bradley's carrier service to similar carriers, to determine differences in shipper metrics. Based on the results, Vera Bradley engaged Körber to undertake and manage a parcel Contract Analysis & Negotiation (CAN) project. The benchmark analysis suggested that Vera Bradley was significantly overpaying for parcel services and that savings opportunities existed. Using a strategy built around benchmarking and primary, secondary and tertiary cost driver analysis, Körber: • Formulated project targets • Constructed bidder packets • Issued a formal RFP to the bidders • Managed the bidder communication plan on behalf of Vera Bradley Once all carrier bids had been received and analyzed, Körber presented Vera Bradley with multiple carrier award scenarios, each representing varying levels of risk and return. Vera Bradley chose to pursue a single- carrier solution, which provided the maximum net cost savings. Carrier One (the incumbent) initially offered concessions that provided nominal annual savings. Carrier One's proposal seemed overly conservative, providing only minimally improved transportation discounts, which also somewhat lowered the fuel surcharge. Conversely, Carrier Two's offer was relatively aggressive, providing more impressive savings. In addition to improved discounts, Carrier Two's proposal included significant Carrier Two's proposal included agreement on requested concessions and DIM weighting. Although Carrier Two's proposal was aggressive, benchmarking suggested that gaps on several key cost drivers remained. Körber developed a second- round negotiation strategy and carrier-specific guidance statements to assist both carriers in developing their second-round proposals. Results Extensive discussions eventually resulted in final proposals from both carriers, with both significantly improving their initial proposals. Carrier Two's final offer provided substantial annual cost savings of nearly seven percent, while Carrier One offered concessions that provided only slightly higher annual savings than its original proposal. As always, Körber not only evaluated the landed transportation costs but also provided an analysis of the fully loaded cost- to-serve for the entire parcel portfolio. After accounting for the following variables, it was determined that Carrier Two offered a total value proposition that was significantly greater than Carrier One over three years: • Switching costs • Carrier-specific value adds • Network and operational optimization opportunities • Resource and asset requirements • Carrier-provided resources With Körber's assistance, Vera Bradley designed and executed a transition plan to allow for a smooth, efficient cutover of parcel volumes with minimal impact on both external and internal customers.

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