1. Enhancing Supply Chain Efficiency and Transparency
Volumes in the supply chain have become more volatile and uncertain, affecting both demand and supply. This has led to rising costs and increased inventory. Recent research indicates that up to $46 billion can be saved annually by optimizing packing and shipping. Shockingly, the average truck utilization in the USA stands at only 57%, and in Europe, it's even lower at 47%. This highlights the substantial room for improving utilization. Supply chain officers are increasingly seeking transparency, which can be achieved by sharing KPIs and implementing dashboards to pinpoint areas for improvement.
2. Leveraging Flexibility for Inbound, Intercompany, and Outbound Flows
An important first step is to analyze the current asset utilization in the network, including aspects of pallet and trailer (or container) utilization in terms of floor space, weight, and volume. By using optimization techniques, you can analyze how much utilization can be improved through better stacking and ordering. Furthermore, consider whether top-up orders can be added when there's empty space available. If not, what changes should be made in arrangements to facilitate this?
Taking it a step further, consider how loading utilization can be factored in when defining the next production batches or intercompany replenishment. This level of flexibility allows you to calculate the impact when you have the capability to fill up pallets and trailers for your customers, or when arranging Vendor-Managed Inventory (VMI) agreements with them.
This approach not only optimizes your internal logistics but also enhances collaboration with partners through VMI, leading to smoother inbound and outbound flows.
3. Practical Optimization Battles Provide Insights
While many software providers boast about their optimization capabilities using AI and ML, it's challenging for companies to compare them. Academic benchmarks are often theoretical. Thankfully, organizations like DIMACS and ROADEF organize practical optimization battles in routing and loading, offering insights into real-world applications and bridging the gap between academia and business.
4. Rethinking MRP through Loading Optimization
In production company supply chains, the optimization process often leads to inefficient loading and transport. A more holistic approach is to compute the impact of loading on batch sizes. This ensures "perfect loads" as part of the MRP process, minimizing production and logistics costs. In industries with high inventory costs, increasing transportation lane frequency can improve flexibility and reduce inventory without cost increases, a particularly relevant strategy in the automotive industry.
5. Impact Case: FrieslandCampina
These insights aren't just theoretical; industry leaders have put them into practice. Companies like P&G, Mondelez, KraftHeinz, and others have demonstrated significant supply chain improvements. FrieslandCampina, for instance, achieved a 3% utilization improvement and 10% process improvement through load optimization for intercompany and sales orders. They've extended this approach to loose loading and ocean shipments, including interaction with VMI. This case illustrates the potential for improvement across the Food & Beverage industry.
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