The client is a middle-market dairy company.
The client was experiencing increasing transportation costs and headwinds in the market. They were seeking to reduce their transportation costs while adding value to the raw milk that would be sold separately in different markets. The client was evaluating a new, $10M+ asset to address these challenges.
Working with the client, Baker Tilly pulled “farm-to-plant” movements at the truck level over the course of the year. Blending in their growth forecasts, we developed network optimization models to accurately reflect their current transportation costs. We used the models to evaluate a number of locations to site a new $10M Greenfield asset/plant and understand the future state costs of a range of siting alternatives, taking into consideration major factors, such as the seasonal nature of the business.
Contrary to expectations of the new asset saving money in the client’s supply chain, the new asset actually estimated an increase in haul costs in all scenarios, resulting in negative cash flow and no new cash to support the debt service on the project. Baker Tilly was able to demonstrate this early in project development, and the client was able to pivot and dedicate resources to other strategic initiatives.