Coca-Cola HBC (CCHBC) holds the franchise to bottle Coca-Cola products in most of Eastern Europe, as well as in Austria, Switzerland, Italy, Ireland, Nigeria and other parts of the world. They needed a tool to help them to make better infrastructure planning decisions, and, after evaluating a number of alternative software packages and vendors, they purchased Profit Point’s Profit Network software. CCHBC uses Profit Network whenever they want to make new investment decisions within their large territory – this story describes one of those studies.

In addition to carbonated soft drinks, CCHBC produces energy, fruit and juice drinks in aseptic and related packaging. Aseptic packaging, which the consumer often sees in the form of boxes or pouches in addition to bottles, is used for products that might deteriorate when packaged in standard container types. With an aseptic process the package is sterile when receiving the food, and the food product is also sterile when it goes into the package. This means that the drink will be safe for consumption when stored at ambient temperature for months or years without the addition of preservatives.

Aseptically-packaged drinks is one of the fastest growing segments of CCHBC’s market, and as a result they needed to plan for how to meet this growing demand – through:

• expanded capacity at one or more of their existing plants,
• construction or purchase of an additional facility,
• purchase of product from some other manufacturer, or
• another means.

Profit Network enabled them to perform this analysis in a quick and efficient manner.

CCHBC gathered the required data for the study, such as the demand forecast, current production capacity, potential locations for new production lines and transportation costs for products from one point to another. CCHBC and Profit Point worked together to build a baseline model (modeling the existing infrastructure), and then enlarge that to look at several alternative capacity expansion locations.

As a result of this process CCHBC identified the best locations at which to expand their production capacity. They went to the next phase of their capital expansion process, where they developed detailed expansion plans for those plants, confident that they were the right places.

To learn more about how Profit Point can help you get the most out of your Supply Chain Infrastructure Planning, call us at (866) 347-1130 or send us an email.

You’re patting yourself on the back. You’ve sorted through the Marine Shipping chaos. In the face of volatile Marine Transportation rates, you just negotiated great prices to transport your North American produced bulk liquid via tank containers to ten Pacific region countries. The contracts are signed and locked in for the next year, holding costs to a known level. A month later you discover there may be a better way. Rather than transport your bulk liquid separately to each of your ten Pacific region customers, you can send all the product on a parcel tanker to a terminal in Singapore, drum it, and ship the drums from Singapore to each of your customers. And you can do this at considerable savings without a reduction in customer service. You looked at so many options, why didn’t you consider this one?

How do you make sure your business is aiming before it fires? The business process of supply chain network analysis and design will help you ensure that you are using the best modes of transportation, the best routes, and the right mix of intermediate assets (e.g. storage, inventory, etc.), to get your products where they need to be to meet your business goals. And the icing on the cake is that it is a relatively easy and cost effective process.

So how does it work? Here is a proven process to design a supply chain network that best meets your business objectives.

1) Clearly define your objectives. No logistics manager is likely to improve all aspects of their logistic and distribution network all at once. The most critical step of the network analysis and design process is to identify your primary objectives. A partial list of critical decisions you might consider is:

• What level of customer service does my market demand?
• What modes of transportation should be used to balance cost vs customer service objectives?
• Which warehouses should supply product to which customers?
• How many warehouses do I need and where should they be located?
• Where should inventory be stored and how much inventory should I be carrying of each product?
• Which manufacturing plants should be making product for which customers/warehouses?
• What routes should I be using to get product from source to destination?
• Are there opportunities for pooling resources that have been overlooked?

Identify your objectives as those decisions that are most important to the bottom line and those that you can do something about.

2) Gather supporting data. In order to make intelligent decisions, you need solid data to support those decisions. This step is usually the most time consuming part of the process. The good news is that the data is available and reusable. Most likely it exists in your new ERP or legacy system. Typical data elements include: demand by product and container type, transportation rates, transportation lead times, warehousing costs (both fixed and variable costs), and inventory costs. If your objectives include determining the manufacturing source of products, you will also need data like manufacturing and raw material costs.

3) Model your supply chain network. Today’s technology can help you make better decisions as there are many vendors offering supply chain network optimization tools. Alternatively, you can cost efficiently configure your own. Choose wisely, as all software is not created equal. Make sure the software you select fully addresses the decisions you need to make and can represent your unique business and logistics network. Typical model components include capacity limitations, customer service requirements, lead times by mode, operating capabilities and the cost of different options.

4) Analyze your supply chain network. There is no silver bullet. Using supply chain optimization tools to make better decisions for your business requires good old-fashioned analysis. Relying on people to leverage the benefits of technology is the path to success. A good supply chain analyst will be both an expert about your business and an expert with the supporting technology. They will need to review many “what if” scenarios with the business management to finalize the supply chain network design.

5) Implement and refine. The supply chain network analysis and design process is not a static process. Successful ideas are implemented and cost savings are realized. And then things change: a large new customer is added at a new location, more production capacity is added, demand takes a nosedive, or raw material prices swing dramatically. Thus, like all good planning processes, the supply chain network analysis and design process must be on going. This process should be revisited regularly (annually/quarterly,) and/or when big things happen within the business.

How do you measure the success of this business process? Firstly, it must generate bottom line savings in your supply chain operations. Secondly, the business process must embed itself firmly in the corporate culture. Treating supply chain analysis as a one-time effort limits your business from fully reaping the fruits of your labor.

“Although we have achieved cost savings between 4% and 11% of our total logistics costs in our network designs, the biggest value that we’ve seen from this type of analysis is a common understanding of the delivery chain among Manufacturing, Marketing, Sales, Logistics, and Planning. This common understanding of cost and customer service trade-offs results from the more complete “picture” of the network that emerges from this analysis and the ability to churn out “what-if” analysis to cover most credible business scenarios. It is this understanding and the ability to quickly understand and exploit changes in the market that is the enduring value of a continuing network analysis process”, says Ted Schaefer, Global Logistics Strategy & Design Manager at the Rohm and Haas Company.

Those businesses that integrate the supply chain network analysis and design process into their corporate culture will reap the benefits of efficient and focused logistics operations year after year. With a process like this in place you can be assured that you aim before you fire.

Dr. Alan Kosansky received his Doctorate in Applied Mathematics from The Johns Hopkins University in 1991. He is the co-founder and president of Profit Point Inc. He has taught at Villanova University and has shared his expertise at many national conferences. Dr. Kosansky has pioneered the application of advanced analytic techniques to transportation procurement, dynamic scheduling, supply chain management and financial optimization. His methods have repeatedly helped manufacturers to reduce their transportation, manufacturing, and inventory costs, and businesses to realize higher profits.

Ted Schaefer is the Global Logistics Strategy & Design Manager at the Rohm and Haas Company. He has been with Rohm and Haas for 18 years, spending the last 12 years in the operation or redesign of various segments of the Company’s Supply Chains. He has done network analysis and designs for the Rohm and Haas Monomers Business in North America, Europe, and Asia. He is a member of the Council of Logistics Management and APICS.

To learn more about how Profit Point can help you get the most out of your Supply Chain Infrastructure Planning, call us at (866) 347-1130 or send us an email.