A large North American Chemical and Polymers company had already executed a number of supply chain oriented projects to improve service while reducing cost. However, market demand was driving the need for even more improvement. Additional, individual projects that could meet this need were increasingly difficult to find.
A total business optimization program approach to the supply chain was set in place. All supply chain functions were thoroughly analyzed and compared against benchmarking data and best practices. To ensure concurrent enhancement of appropriate customer segment satisfaction and overall business value, these analyses included active engagement with sales and marketing, as well as other business functions.
The key component of the program was supply chain network optimization using a mixed integer linear program.
- Optimal locations for distribution centers and corresponding transportation were developed.
- The optimization methodology was institutionally established.
- Once the optimal supply chain network had been determined, the program addressed targeted opportunities to further enhance performance within the network.
- Inventory management was refined to ensure supply chain network performance and minimize losses.
- Methods were established to improve utilization of transportation assets, such as railcars, to include involving customers on railcar returns.
- Adherence to optimal transportation guidelines was aggressively pursued.
- Distribution center efficiency was increased.
- Improvement sustainability was ensured through effective use of KPIs and comprehensive change management.
The program achieved over $25 million in sustained annual savings, a 10% improvement for a supply chain already thought to be optimized. These results were verified by a detailed audit. The value of the supply chain to the total business became dramatically more credible.