PepsiCo bags the award for most innovative Supply Chain Company of the year in the prestigious SCLC (Supply Chain Leadership Council) Food Retail and Supply Chain Awards 2011 for its Fleet Routing and Optimization initiative implemented by ThinkLink Supply Chain Services.
PepsiCo India, with a large delivery footprint has a special challenge of managing last mile deliveries to points of sale. This challenge is augmented because of the following constraints:
- Special truck design ruling out market hiring to manage skews
- High seasonality in product sale, peak months contribute up to 15 percent of annual sales leading to low asset utilization through the year by design; if utilization in peak months is not at 100 percent this has significant impact through the year
- Overall cost of product is not high, drop sizes are small, and therefore cost of last mile logistics as percent of revenue is high (up to 10 percent)
All of this means that better planning leading efficient routes can have significant bottom-line impact. With this in mind PepsiCo selected ThinkLink, and started work on an ambitious project in 2010 to drive efficiencies in last mile logistics. Across the country PepsiCo and its distributors deploy thousands of vehicles to deliver to several tens of thousands of retail outlets. Typically this delivery route is designed on a static truck and outlet relationship. Due to this static relationship, this process is not the most efficient one and leads to low asset utilization for the fleet and resort to market hiring to meet sales skews.
The project goal was to set up efficient territory design and routing processes to enable fleet reduction, day-to-day balancing of routes to ensure high utilization while keeping unique service constraints like the payment collection relationship that Delivery Agents (DAs) enjoy. The roll-out process has meant configuring the system to reflect ground level challenges like one way streets, no entry timings, lack of parking space in certain areas and traffic rush hours while estimating delivery capability.
A more significant challenge was to work with the delivery team on change management in a dynamic environment. Also, the financial management processes and IT systems have been redesigned to support dynamic routing paradigm. The sales team is a Key partner on the project as this project impacts end sales on a day to say basis and every missed POS is a case sale lost, therefore this is a strong collaborative project between supply chain, sales, finance, IT and an external partner driving process design and change management.
Key benefits that have been established include:
Reduction in costs and improvement in vehicle utilization:A reduction of 25 percent on captive vehicles has been achieved by aligning the business process with dynamic route determination. This has added value in the supply chain by improving the load efficiency of vehicle and reducing Capex required for additional vehicles thereby reducing the overall delivery cost per case. Efficient vehicle loading and dynamic vehicle allocation will ensure there is no overloading and market vehicles required to deliver in peak season are kept to minimum leading to huge freight savings.
Balancing of workloads for Das (Delivery Agents):Dynamic route calculation also improves the balancing of workloads for DAs leading to regular 8 hour shifts on 90 percent + days, which results in effective workforce management & efficient workforce utilization. This also brings down the on average basis.
Reduced cost on warehousing (reduced parking footprint):Reduction in the total required vehicle implies lesser space required for parking and loading which results in cutting the maintenance costs of warehouse.
Social Benefits:More vehicle utilization efficiency clearly means lesser emissions and lesser traffic congestion. When scaled to nationwide operations, it will result in estimated 500 lesser vehicles required to handle delivery operations and average 24 kms per day travel distance saving per vehicle. Assuming a mileage of 6 KMPL, this will result in a fuel saving of 2000 liters per day!