When leading global spirits producer Diageo decided to go solo in South Africa, after a strategic split from its beer partners, the company needed an exceptional third party logistics service provider to enable a seamless transition and the continued growth ofits brands’ market share. Imperial Logistics has proved the ideal partner, with customised services, a commitment to collaboration,and continuous improvement initiatives that are constantly improving Diageo South Africa’s competitiveness.
The Challenge
In 2015, Diageo decided to forge its own path in the South African market, restructuring its business through the termination of a series of joint ventures. When he announced the split from the company’s beer partners, Diageo CEO Ivan Menezes commented: “We have worked very successfully with Heineken and NBL throughout our partnership, growing the beer business and establishing market leadership in spirits. From this leadership position, we now believe that Diageo has the necessary scale to move to the next stage of growth for spirits… in a focused, simplified ownership structure.”
This “next stage of growth” for Diageo South Africa’s spirits and ready-to-drink brands included securing the right logistics partner for its warehousing, distribution, reverse logistics and demand replenishment planning.
The Solution
Imperial Logistics won thenational contract for Diageo South Africa’s 3PL logistics services on tender. The company’s unmatched reputation for being cost effective, efficient and going the extra mile for its clients contributed to the contract win,says Imperial Logistics chief business development and strategy officer Cobus Rossouw.
Imperial Logistics collaborative approach is reflected in the regular project meetings that formed part of the initiation processes. Standard operating procedures were revisited and redefined, and detailed cutover plans were followed.
Working closely together, Imperial Logistics and Diageo ensured that best practices were in place for all of Diageo’s logistics activities. Imperial Logistics assisted with technology and administration integration, and had a dedicated team on standby for Diageo 24/7, to ensure that nothing was left to chance.
Imperial Logistics reports on a testing 38 KPIs daily for Diageo, and there are an additional 64 KPIs on the contract, Rossouw notes.
The continuous improvement initiatives that have been implemented and are currently being rolled out by Imperial Logistics include retail centralisation for Diageo, which will entail consolidating stores to their distribution centre for replenishment needs. A minimum order value initiative that has been put in place is delivering the benefit of a reduction in the number of drops, which translates into cost and time savings, he says.
A pilot project in which Imperial Logistics is delivering direct to home depots, thereby by-passing the Elandsfontein warehouse, is underway, and Rossouw reports that by replenishing stockholding home depots directly from the factory, Imperial Logistics is reducing storage, transport, handling and security costs for Diageo.
The Outcome
Since partnering with Imperial Logistics, Diageo’s out of stocks have been substantially reduced through collaboratively identifying concerns, effective reporting, visibility and daily communication between the teams.
Imperial Logistics has also turned around Diageo’s KPIs. “KPIs in this unrivalled partnership are not only addressed monthly, weekly, or even just daily. Our team meets three times a day to discuss KPIs, and ensure that these are constantlyprioritised and reported on,” Rossouw stresses.
“Imperial Logistics has proved that it has the ability, flexibility, scale and reach to successfully manage Diageo’s peak trading periods (and volumes), which are notoriously testing in the alcoholic beverages sector. The peak period of October, November and December accounts for approximately 38% of Diageo’s annual volumes.Imperial Logistics supported direct deliveries for larger volume orders to Diageo’s customers, which freed up resources across the supply chain. This ensured that despite heightened activity we still delivered against the demand.”
Reflecting the truly collaborative nature of this partnership is thecontract’s gain share model, which provides a potential benefit to both parties based on the net cost savings that can be achieved on transport and warehouse costs. “This encourages both parties to strive for continuous improvement, and to ensure that the best solution is implemented. We are proud to have proved why Imperial Logistics is a leading FMCG logistics provider, and look forward to our partnership with Diageo going from strength to strength,” Rossouw concludes.