Starting in the early 1990s, consumer goods companies have been in the hunt to cut logistics costs.
The typical efforts by both large and small manufacturers have been to use less costly pallets and packaging, to switch to lower-cost carriers, and the like.
Today, the focus on reducing costs is still alive. But there are changes.
"It's more critical now," says Ralph Drayer, president of Supply Chain In'sights, a Cincinnati-based consultancy.
"And I think the biggest change that's happened in logistics is going from a cost center mentality to looking at logistics as a key driver of business success. What can we do with the supply chain, with logistics, to drive better value to the end customer and consumer? So, cutting costs has become a strategic differentiator for leading companies. It's a source of business growth as opposed to just efficiency. That is a huge shift."
Beginning in the early to mid-1990s, companies began to recognize this opportunity and act on it. They attacked the drivers of costs with initiatives that focused on touches (cross docking), speed (a dedicated fleet) and visibility (collaborative planning, forecasting and replenishment).
At Procter & Gamble Co., the key initiative was continuous replenishment. The consumer products giant started with "a very selfish objective of reducing our logistics and supply chain costs," recalls Drayer of his former employer.
"What we found was that by installing this logistics vehicle, not only did we achieve the inventory savings, the transportation savings, the better load cube, but we created a platform''a collaborative platform''that has really served as a foundation for other collaborative initiatives that have grown our top line," he says.
Food Logistics has assembled the following portfolio of examples of companies that are cutting their logistics costs effectively.
Newell Rubbermaid Transforms Logistics Operations
Newell Rubbermaid Inc. is a world-class maker of consumer goods with a brand portfolio that includes Paper Mate, Rubbermaid, Levolor, Sharpie and Graco. The Atlanta-based company spends $1 billion on logistics across nearly 30 different divisions.
A few years ago, the divisions were managing transportation as an offshoot of order management or warehouse management systems. This was resulting in heavy manual processes and limited functionality. Only one division had an actual transportation management system, but it was unable to deal with the complicated planning needed to drive high productivity.
Newell Rubbermaid aimed to transform its transportation and logistics operations. It set an aggressive goal of achieving 5 percent year-over-year cost reduction and productivity improvement. Specifically, the company sought to eliminate legacy systems and manual-driven tasks and to reduce IT costs. It also wanted instant access to centralized information and increased collaboration among suppliers, service providers and customers.
In addition, Newell Rubbermaid wanted proactive monitoring and alert notification about product movements and real-time planning, execution and event management with the ability to divert and expedite shipments in the best way possible.
To gain these benefits, the company deployed new software to manage and optimize shipments across all global business units regardless of geography or transportation mode. The application, the GC3 from Global Logistics Technology Inc. (G-Log), Shelton, CT, combines supply chain visibility and execution functionality in a single integrated Web-native architecture. It enables the company's many business units to autonomously manage all aspects of the logistics lifecycle from shipment order to freight settlement.
"As our business expanded both from a sourcing and finished goods shipment perspective, it was critical that we implemented a flexible, scalable global application that could support our burgeoning worldwide business," says Mark Michener, global manager, transportation systems. "A Web-native architecture was imperative."