Gaining Traction with Gain Shares

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Consultants often speak of end-to-end collaboration with our clients. We contend “don’t view us as an external resource, but as a team member who can accelerate results”; then, we finish up the project in 6-8 weeks and move on to the next project. In some ways, this is the nature of our business model, but many opportunities exist to evolve and begin linking our compensation to the client’s success. One of the best ways to accomplish this is to structure project fees as a Gain Share, which is ideal for projects like a Network Optimization for a Transportation Company. The gain share is pretty simple: our fee is predefined as a % of our clients’ savings across the KPIs that drive their business, in addition to a small fixed operational fee to keep our lights on.

DPO&Co excels in Network Optimization studies and has completed several initiatives for leading CPG, Grocery and logistics clients. These projects are ideal for a gain share structure because we can directly quantify the impact of the improvements implemented upon project completion. This enables us to spend our time driving value, not counting value. Our transportation clients continuously emphasize the following 4 KPIs, each of which can be easily tracked and are often already at the top of the client’s KPI dashboard: 

1. Inventory Turns 

2. Spoilage & Breakage

3. Return Transportation Revenue

4. Cube Utilization

Our approach involves designing a series of scenarios, specifying varying numbers of Distribution Centers (DC) and Cross-Docking stations along key points in our clients’ typical routes (figure 1). Then, we calculate the TCO (Total Cost of Operations) and resulting NPV of each scenario (figure 2). We also leverage advanced analytics to balance the incremental inbound revenue versus the cost of additional cross-docking and unloading time at the DC (figure 3).

Ultimately, we combine these calculations with practical insights and align on a recommendation with the team. In this manner, we truly have skin in the game. If we underestimate the complexity of increasing inbound loads at the DC and it increases costs or creates lost revenue, we feel the pain just like our clients. Essentially, we put our money where our mouth is. This further incentivizes us to sanity check our models, leverage the expertise of our clients’ experienced professionals, and drive the most value possible, with only actionable recommendations. It’s a great way to build cohesive collaboration, both during and after the project. Contact us today and let’s gain some traction through a gain share.