Green and Lean
Jun 24, 2009
Kimberly-Clark is serious about sustainability and its responsibility towards the environment. As the manufacturer of famous household brands like Andrex, Kleenex and Huggies, the company is committed to sustainability in its truest sense and is now starting to reap the benefits both in terms of reducing its impacts and also by running a lean and efficient supply chain which in turn brings real benefit to its biggest customers, the high street grocery retailers, and ultimately to consumers. Working with i2 Transportation Management solutions, is one of the ways in which Kimberly-Clark has been able to reduce its CO2 output, while also reducing costs.
Toilet rolls, kitchen rolls, nappies and tissues quickly fill up the shopping bags on a trip to the supermarket. They may not weigh much, but they do take up space, and this creates a range of transportation challenges. Most of Kimberly-Clarks products have a large cube size, but a relatively low price per item. As a result, transportation costs make up a significant proportion of the product costs. Transportation is six per cent of our net sales value and quite a big number on the profit and loss sheet, says Peter Surtees, European Supply Chain Director of Kimberly-Clark. In addition, transportation inflation is inevitable as oil prices, green taxation, road taxation, the Working Time Directive and driver shortages impact rates.
To try to minimise its transportation requirements, Kimberly-Clark has manufacturing plants right across Western and Central Europe and aims to produce 70% of its products in the same country that they are sold in. Even so, the company is still responsible for organising over 100,000 freight movements in a year. All of these movements take place by road and, with customers in every corner of Europe, there are no primary routes.
Previously, the company used a hosted Transportation Management System (TMS) to help it contract out its shipments to third party hauliers. Every time that it booked a truck movement using the software, it paid a fee to the software owner. While this solution met Kimberly-Clarks day-to-day needs, it did not enable the company to implement more flexible contract allocation processes to minimise costs. Our existing TMS didnt offer us the functionality we wanted, recalled Surtees. 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 different areas of its business, but decided against deploying SAPs transportation management solution. It conducted a full review of the solutions available in the market and selected i2s Transportation Management solution. At the time, SAP didnt offer the functionality that we needed and we werent prepared to wait, says Surtees. i2 was the most functionally rich solution available and enabled us to run the transportation model that precisely suited our business.
Savings of 2 million
Following a three-month design phase, the i2 Transportation Management solution was rolled out to cover the whole of Europe within just one year. In a parallel project, the i2 solution was also deployed at Kimberly-Clark in North America. Compared to other software implementation projects that the company has undertaken, the i2 implementation was a relatively easy process, says Surtees. The solution is now used by around 60 logistics professionals in Europe, most of whom are based at the companys Shared Service Centre in Brighton.
Kimberly-Clark uses the i2 Transportation Management solution 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 i2 Transportation Management solution 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 2nd, 3rd or 4th choice carrier, until the best available price for the route is obtained. To enable this integrated process, the i2 software is tightly integrated with Kimberly-Clarks SAP order management system and an external messaging system for communicating with carriers. Over 80% of our freight movements are handled by our 1st, 2nd or 3rd choice carrier for price on every route, and this is a key performance indicator for our business, says Surtees.
The system has been extremely successful in enabling Kimberly-Clark to find the most cost effective operators by route and reduce its costs. The company estimates that it will save 1 million a year by allocating transportation 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.
and half a million kilos of CO2
Because of the flexibility and automation of the i2 solution, 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 youve got and its a virtuous cycle, says Surtees. When we reduce the number of miles travelled on the companys behalf, we directly contribute to a reduction in CO2 emissions.
The i2 solution has enabled Kimberly-Clark to become greener. The calculations that Kimberly-Clark has made more than substantiate this claim. One gallon of diesel produces 12kg of CO2, according to figures provided by the company. Therefore, if its trucks travel an average of 8.5 miles per gallon, every mile that Kimberly-Clark takes off the road leads to a reduction in CO2 of around 1.5kg. The company estimates that its 1 million cost efficiency saving corresponds to a reduction in mileage of 380,000 miles and a reduction in CO2 of as much as 540,000kg.
Some organisations still see environmental responsibility as a cost. But Kimberly-Clark is one among those companies that successfully demonstrate that a focus on sustainable business practices goes hand in hand with cost reduction and efficiency. Through its use of advanced supply chain management tools, it has saved money, moved a step closer to being an indispensible partner to its retailer customers and proven that it is indeed possible to be both lean and green.