Imperial Logistics

Imperial Cold Logistics and Resolve Solution Partners – Transformation of distribution in the FMCG Cold Chain

Tuesday, 11 August 2015

ICL’s core services include warehousing, inventory management and distribution solutions for a unique product category with very stringent logistics requirements. In order to create the most cost-effective offering for the market, the business model offers a shared infrastructure solution, whereby an optimised and practical service can be offered to manufacturers of these products and their distribution in to the retail footprint. Notable customers include McCain, Astral Foods and Lancewood Cheese.

The business problem

Due to a combination of macro- and micro-economic factors, the South African Retail and FMCG market have been under significant financial pressure for a number of years.  ICL was no different, having to deal very quickly with the following challenges:

Central to the concerns for ICL was their extensive supply chain network. They were operating through 11 facilities throughout the country, on top of an expensive fleet of trucks. In addition, the management and execution of customer’s orders was thought to be causing inefficiencies.

ICL contracted their peer company, Resolve Solution Partners, to assist in re-defining an operating model which will improve the business’s financial situation and improve its service offering to customers. Resolve, also an Imperial Logistics’ company, is a professional services company, focusing on advisory and outsourced services in the Supply Chain arena.

The Analysis

Resolve performed an overall Supply Chain assessment on the current ICL network and operations, identifying the key drivers of performance and associated improvement opportunities and the business’s challenges in more detail.

This assessment went into great detail on:

The analysis focused on the following key areas:

The Supply Chain assessment showed that there was significant value to be realized, both in efficiency and in customer service. It mapped out a number of initiatives and improvement projects with detailed operations implementation calendar and project plan.

The Solution

The improvement initiatives were grouped, prioritized and sequenced and planned into the following projects

1. Change the Drop based approach.  This was identified as the 1st step to change the network and freeing up capacity.
The key elements of this project was:

2. Implement the Network changes and new Inventory management.  The key elements of this project was:

3. Review the Rate structure.  The key elements of this project was:

4. System improvements and Operational visibility

5. Expansion of core services 

Scope and context of the Implementation

The recommendations were implemented as follows:

1. Reducing the “customer tail”.  

2. Closing remote distribution centres

3. Implementation of a state of the art Transportation Management System managed by Resolve.

4. Weekly 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:

5. Implementation of Activity Based Fees to address the cost impact of Principals that were either not generating sufficient revenue, or that were causing excessive distribution costs.  This included:

6. Implementation of a state of the art Demand Planning system, and centralising the demand planning process.  This allowed ICL to optimise the utilisation of warehouse space and reduce lost sales as a result of out of stock situations.  This resulted in an improvement in outbound service levels of between 3% to 5%.  Furthermore, ICL’s outbound service levels consistently started to exceed the inbound service levels from its Principals.

7. Implementation of standardised weekly operational scorecards that were circulated to all levels of the organisation, to Principals and to the Retail Customers.

These scorecards includes:

Results Achieved to Date

Improved distribution efficiencies as a result of operational disciplines and customer order management:

Improved network, operational behaviour and capacity as a result of customer and principal rationalisation has resulted in ICL being able to sign McCain as a principal

Because of the operational and financial turnaround of the business, the 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 is planning to implement SAP in its business in August 2015.  This will provide ICL with the platform for further optimisation of its business, as well as the introduction of bulk storage and primary logistics services to its Principals.

Learnings

Holistic approach to problems lead by business and operational teams meant that opportunities identified by analysis were implemented at an acceptable base to operations and in the correct sequence.

All proposed changed were interrogated from a commercial perspective to ensure that these made sense to the bottom line and that potential bottom line risks were identified.

Continuous review of changes implemented meant that modeled solution was quickly refined to optimal operational realities.

As the change program was implemented successfully the program gained credibility with operations and further momentum for the program was gained by operational inputs and recommendations.

The Team involved

IRL Executive team; IRL Operations team; Resolve TMS team; Resolve Consulting Team


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