Kimberly-Clark is on target to save £2 million each year after rolling out JDA’s transport management software to reduce the miles travelled by its logistics providers and more flexible rates.
The software has enabled the company, which manufactures brands including Andrex, Kleenex and Huggies, to reduce distances travelled on its behalf by 380,000 miles, which equates to an annual carbon dioxide saving of 540,000kg.
It has also allowed Kimberly-Clark to secure more competitive deals from its expanded list of haulage contractors.
Most of the company’s products have a large cube size but a relatively low price per item, so as a result transport costs make up a significant proportion of the product cost.
Peter Surtees, European supply chain director, says: “Transport is six per cent of our net sales value and quite a big number on the profit and loss sheet. In addition, transport inflation is inevitable as oil prices, green taxation, the Working Time Directive and driver shortages impact rates.”
In a bid to minimise its transport requirements Kimberly-Clark has manufacturing plants across western and central Europe and aims to produce 70 per cent of its products in the same country that they are sold in. However, the company still organises more than 100,000 freight movements each year, all of which take place by road.
Prior to deploying the JDA system, Kimberly-Clark used a hosted transport management system to help it contract out its shipments to third party hauliers – every time it booked a truck movement using the software it paid a fee to the software owner.
This system did meet the company’s day-to-day needs, but Surtees says: “It restricted our ability to do some of the more imaginative stuff, to operate strategically and exploit opportunities to reduce costs.”
Kimberly-Clark uses SAP applications in many aspects of its business but turned to i2 Technologies’ (now JDA’) transport management system.
“At the time, SAP didn’t offer the functionality that we needed and we weren’t prepared to wait,” says Surtees. “i2 was the most functionally rich solution available and enabled us to run the transport model that precisely suited our business.”
Following a three-month design phase, the system was rolled out across the whole of Europe within one year. In a parallel project the i2 system was also deployed in North America.
The system is now used by around 60 logistics professionals in Europe, most of whom are based at the company’s shared service centre in Brighton.
Kimberly-Clark uses the transport management system to operate a league table, which ranks available carriers according to the lowest cost per route.
The company has no long-term, fixed commitments with its suppliers, so carriers can increase or decrease their prices flexibly depending on different circumstances. For example, if a haulier has a part-empty truck that is already booked to travel between two cities, it may want to offer very competitive rates to Kimberly-Clark to enable it to fill the remaining space and operate the journey more cost effectively.
Equally, if a carrier knows that it has lorries due to return empty from regular deliveries to a location, it can offer lower rates to Kimberly-Clark to fill this capacity on the way back.
The system keeps an up-to-date record of all prices offered by all carriers per route at any one time and then, as orders come in, it automatically offers the contract to the lowest price carrier.
If this carrier is unable to fulfil the job, the software automatically forwards the order to the second, third or fourth choice carrier, until the best available price for the route is obtained.
To enable this integrated process, the software is integrated with Kimberly-Clark’s SAP order management system and an external messaging system for communicating with carriers.
“Over 80 per cent of our freight movements are handled by our first, second or third choice carrier for price on every route, and this is a key performance indicator for our business,” says Surtees.
The company estimates that it will save £1 million a year by allocating transport contracts more cost efficiently, route by route. In addition, the company saves £1 million a year by not having to pay fees to its software provider for each truck movement scheduled.
Kimberly-Clark has been able to increase its carrier base to 170 companies, while decreasing its administration costs.
It now does business with more smaller and niche operators, who are often more competitive on certain routes and more likely to have return legs to fill.
“The more carriers you have got, the less empty running you’ve got and it’s a virtuous cycle,” says Surtees. “When we reduce the number of miles travelled on the company’s behalf, we directly contribute to a reduction in carbon dioxide emissions.”
The company estimates the efficiency saving corresponds to a reduction in mileage of 380,000 miles and a reduction in carbon dioxide emissions of some 540,000 kilos.
