Reducing the effective logistics costs of products by 8% for an FMCG giant

A radical shift was desired in the way the company managed the movements of goods from its plants to warehouses and regional distribution centres. After a thorough assessment of its operations and value chain study, we identified the following key challenges:

1. Unpredictable vehicle availability

The company was working with local transporters constantly competing with one another. This, coupled with intensive fluctuating business seasons, made vehicle shortage a regular phenomenon. It led to significant delays in the delivery of products to distribution centres and eventually the market. It also made budgeting, forecasting & planning incredibly difficult.

2. Poor load planning

The company required an integrated perspective on its secondary distribution operations. Its existing system of loading goods into trucks was inefficient with respect to both load optimisation (underutilised tonnage and/or volume) and loading time (24 hours).

3. Inefficiencies at the warehouse

Inefficient management of operations at the warehouse resulted in high operating costs, that also included ancillary costs in the form of high loading time and demurrage.

4. Lack of in-transit visibility

Working with local transporters meant no in-transit shipment visibility and total lack of accurate transit time estimations. This dealt a fatal blow to the inventory planning at the distribution level and led to high detention cost.

To tackle rising costs and enable better inventory management with shorter transit times and more efficient operations, Varuna Group devised an integrated approach. Realising that the root cause of the challenges that the company was facing was the lack of an efficient 3PL network, we helped design and create the same around its manufacturing plants and regional distribution centres.

1. Ensuring vehicle availability through dedicated allocations

Since market vehicles were at the mercy of seasonal demands, we allocated a fixed number of trucks from our fleet to the company to cope with the situation and warrant timely placements. To ensure continuous return movement for constant vehicle availability and also contain the cost of dedicating a part of our fleet, we assigned equal and opposite return loads to the vehicles.

2. Identifying the right vehicle fit & utilizing technology to ensure load optimisation

After a thorough analysis of the company’s products, we selected the right vehicle type. We moved away from manual load planning and introduced an advanced software to generate an optimum load plan basis the SKUs under consideration and the vehicle to be used. This enabled us to upgrade the space utilisation from 65% to 95% and facilitate cost-effective transportation.

3. Utilising buffer warehouses for better inventory management

The company had established a kitting warehouse next to its manufacturing units. After a thorough examination, our team introduced aggregation at this warehouse, using it as a buffer warehouse. We also kicked off strategic, streamlined measures such as 24x7 operations leading to optimized transit times and reduced detention through better inventory management.

4. Ensuring efficient operations

Strict adherence to global quality standards, developing comprehensive SOPs and periodic training of the workforce ensured seamless management of operations, significantly bringing down the costs related to demurrage, damages and other ancillary cost leakages.

1. 50% Reduction in transit times

2. 100% En route vehicle visibility

3. 0.04% Dispatch error

4. 98% Placement efficiency

5. Increase in vehicle space utilization from 65% to 95%

As a result of our systematic, transparent and predictable operations, the company not only experienced massive improvements in its distribution chain but was also able to boost its profits. It was able to:

1. Reduce cost per tonne

2. Reduce time to market

3. Reduce inventory size

4. Register 8% reduction in the effective logistical cost of products