Identifying £3.45m of Operating Cost Savings Ahead of a Major 3PL Renegotiation
Client
Luxury UK Retailer | Food and Gifting | Multi-Channel D2C
The Situation
Operating costs across two warehouse sites had continued to rise, despite both operations being managed by the incumbent 3PL. Leadership needed a clear, evidence-based understanding of where costs were leaking ahead of a major contract renegotiation — without compromising customer service or operational stability.
At the same time, there was growing concern that the relationship had become overly reliant on open-book reporting without enough commercial challenge or operational accountability.
What We Did
Built a fully bottom-up operating cost model across both warehouse operations, covering labour, agency usage, transport, returns, hamper build and off-site storage
Conducted stakeholder interviews, operational walk-throughs and detailed analysis of weekly trading actuals
Identified and stress-tested four priority initiatives alongside a longer-term pipeline of secondary operational improvements
Reviewed SKU concentration, stock holding and operational complexity to identify hidden inefficiencies impacting warehouse activity
Results
The diagnostic identified £3.45m of annual operating cost savings, prioritised and ranked by impact, including:
£1.44m through an agency labour retender
£602k through multi-skilling permanent warehouse operatives
£568k through a revised permanent-to-agency labour mix
£460k through transport review and retender activity
£384k through changes to premium gifting package build processes
Additional analysis identified that:
67% of unit sales were concentrated within the top 24 SKUs
94% of overstock sat within low-velocity product lines selling fewer than 150 units per week
Beyond the Numbers
The project fundamentally changed the basis of the 3PL relationship.
Rather than relying on open-book reporting and historic assumptions, leadership gained a commercially defendable view of operational cost drivers, service expectations and performance accountability ahead of renegotiation.
The work also created the analytical foundation for a broader shift toward KPI-led continuous improvement and gain-share thinking — moving the relationship from reactive cost management to structured operational performance.
