Food & Beverage

Issue

One of the largest soft drink bottlers/distributors in the nation, whose distribution network had grown significantly as a result of acquisitions, engaged The Highland Group to develop a formal methodology to calculate the economic impact associated with closing or moving warehousing facilities.

Highland Approach

The Highland Group began by establishing a multidisciplinary Network Scenario Team (NST) and facilitating the identification of five specific warehouse close/move scenarios to form the basis of a comparative analysis. The team identified, collected and modeled various data and created custom tools to calculate site, distribution and resource requirements for each scenario. The resulting information was used to create a detailed roadmap to the optimum distribution solution.

Actions Taken

• Customized a Logistics Network Tool to meet client distribution requirements: length of work day, type of vehicle and capacities of vehicle.
• Customized the Site Sizing Tool to identify the required size of each facility, given it’s demand in each scenario.
• Identified variable costs associated with transportation from the bottling facility to the warehouse, the warehousing costs and the costs to deliver product to the customer.
• Modeled six months of data at the customer invoice level to validate the model against the actual P&L.
• Calculated the economic impact of five identified scenarios using geo code data and the variable costs.
• Identified non-economic criteria that should be considered in the final decision.
• Trained two employees to run additional scenarios using the Logistics Network Tool and Site Sizing Tool.
• The Network Scenario Team proved to be such a strong resource that it continued to exist beyond the initiative with the responsibility of identifying additional scenarios and acting as the clearing house for new scenario requests from management.
• While the internal belief was that fewer warehouses would be a more cost effective solution due to the reduction in operating costs, some consolidation had already been completed and the client was reaching the point of diminishing returns for warehouse closures. It was determined that other network variables would hold greater weight in future network decisions.