Distribution Consolidation Saves $40M

PROJECT BACKGROUND

A major food company was experiencing problems with its Direct-Store-Delivery (DSD) operations.  The distribution network consisted of more than 100 company-owned and/or operated DSD depots across the country.  Many of the depots were small and located in isolated markets, and consequently experienced significant issues with inventory levels, order fill rates, and high operating costs.

The company conducted a comprehensive analysis and decided to consolidate the network into a smaller number of larger depots and expanded truck shuttle operation to serve more remote customers.  They hoped that these modifications would reduce inventory levels, improve order fill rates, and reduce overall operating costs.  The plan was approved by the Board of Directors with implementation to be completed within 30 months.

Although company employees were willing to increase their efforts in order to implement the project, they were already fully consumed by on-going operating responsibilities.  Without effective planning to direct the implementation activities, successful execution within the approved time frame would be difficult, if not impossible.  Adding to the strain, there was a strong desire to shorten the schedule considerably from 30 to 18 months to accommodate the company’s future plans to utilize the DSD network for other products. 

With millions of dollars in annual savings at stake, time was critical.  The company did not have an internal project management resource with the necessary skills and experience to lead the team and execute the project.

IPM’S SOLUTION

IPM was engaged to manage the project after the first three months had passed.  While a project team had been formed and was planning for the implementation of the first master depot, progress was slow and the results were mixed.  It was clear that a comprehensive project plan would be needed in order to organize, and ultimately accelerate, the team’s activities to the required pace.

Working in a highly collaborative manner with the project team and other key stakeholders, IPM developed a comprehensive integrated project plan that included all of the required tasks for commissioning the new master depots and for closing the existing depots.  Next, IPM led the team through an optimization process that reduced the schedule to the desired 18 months without jeopardizing customer service or production operations.  After the first few master depots were successfully implemented, IPM trained the client’s newly hired project manager to take over the responsibility for the remaining implementation activities. 

PROJECT RESULTS

With IPM’s professional project management services, the DSD network consolidation project was able to meet the accelerated project schedule.  Results included:

  • Annual operating savings:  $16M
  • Capital investment reduction:  $20M
  • Order fill rate:  greater than 99% (improved from 96%)
  • Schedule:  18 months, a 40% reduction from the original plan


In addition to realizing the above results, the modified DSD network gives the company additional flexibility to expand their product distribution, therefore improving customer satisfaction and their own revenue.