Page 34 - Case Study Annual 2015

transportation plans are developed daily based on the
output of a specialised route planning and optimisation
system. Transportation plans are expedited in real
time by a team of expeditors.
• W eekly volume smoothing was implemented to
ensure that equal numbers of trucks are used to
deliver stock on all the days of the week. This implied
that the nominated delivery days of some customers
had to be moved to days in the week where ICL had
historically low distribution volumes.
This had a dramatic impact on the operations:
• Fewer rental trucks were required to cater for days
in the week with higher deliver volumes than others,
and vehicle utilisation was improved. Warehouse
activity became similar on all days of the week,
which improved warehouse productivity and fewer
temporary staff were required to assist with high
delivery volume days
• Activity Based Fees were implemented to address
the cost impact of principals that were either not
generating sufficient revenue, or that were causing
excessive distribution costs. This included: overstock
storage fees that applied to stock that was stored
in excess of the contractual requirements; after
the initial three-month period, the minimum order
quantity was replaced by a ‘small drop delivery
fee’ of R500 per delivery, which was applicable
to customers that could not order more than
R10 000 per month. Principals were encouraged
to discontinue the deliveries to unique or small
customers, or alternatively bear the full distribution
cost of deliveries to these customers.
• A state-of-the-art Demand Planning system was
implemented, and the demand planning process was
centralised. This allowed ICL to optimise warehouse
space and reduce lost sales as a result of out-of-
stock situations. This resulted in an improvement in
outbound service levels of 3-5%.
• Standardised weekly operational scorecards were
implemented that were circulated to all levels of the
organisation, to principals and to retail customers.
These scorecards include inbound service levels;
32 the logistics news case study annual 2015
stock levels and analyses of overstocks, excess
stocks and potential stock-outs; outbound service
levels; on-time service levels; and an analysis of lost
sales.
Results achieved to date
Improved distribution efficiencies as a result
of operational disciplines and customer order
management meant that:
• Vehicle utilisation has improved by 22%. Some 50
trucks were removed from the fleet which resulted in
a significant cost saving.
• Fleet size has been reviewed at major sites enabling
the correct vehicles to be purchased, resulting in
spare capacity at minimal cost, enabling ICL growth
strategy.
• On-going SDAs have been completed resulting
in smoothed distribution activities and improved
customer service. ICL complete distribution visibility
in terms of service and costs has become a further
enabler for principal negotiation and growth.
• Unique and small customer deliveries were addressed
by closing 1 300 of the smallest ‘tail’ customers,
which resulted in a loss in sales revenue of 1% but a
saving in transportation costs of 15%.
• ‘Small Customer Delivery Fees’ were introduced,
which covered the cost of the remaining unprofitable
deliveries to small customers.
• T he implementation of activity based fees such
as ‘overstock storage fees’ to address specific
unprofitable customers generated 5% additional
logistics revenue per year. Principals that operated
within the contractual limits were not significantly
affected by these fees.
• Improved network, operational behaviour and
capacity as a result of customer and principal
rationalisation have resulted in ICL being able to sign
additional major principals.
Because of the operational and financial turnaround
of the business, shareholders regained their appetite
for significant capital investment in the business. This
enabled ICL to develop the largest commercial frozen
bulk store in South Africa. This will enable ICL to
expand its services to customers to include finished
goods cold storage and primary logistics.
ICL recently embarked on a project to provide
detailed input in the S&OP processes of key principals.
This requires close collaboration between ICL and the
sales teams of its principals.
ICL has implemented SAP in its business, which
will provide the platform for further optimisation
of its business, as well as the introduction of
bulk storage and primary logistics services to its
principals. •