Beverage Distribution

Case 1: Production and distribution network structure optimization in beverage industry

Client Situation

Client had expanded operations through acquisitions. Client's production and distribution network consisted of two plants and five regional warehouses. Client had problems with meeting customer service levels. In order to improve profitability, client wanted to optimize network structure. Customer hoped that this would also solve problems in delivery reliability.

The objective of the project was to optimize production and distribution network and to develop distribution concept.

PlaNet's role in the project

• Analyze current sales, production, product flows and costs together with the client's key people. Current actual distribution costs were calculated based on Time & Motion study in delivery trucks.
• Define the costs to be used in the model and build the cost-based optimization model
• Optimize the network: number, locations, product mix and capacities of production plants and distribution centers
• Develop a new, cost effective and customer-oriented distribution concept and a new operational plan for the remaining DCs
• Assist client in implementation

Solution and client benefits

• Client achieved 15% savings in logistics costs by optimizing the network. Reasons behind savings were minimized transportation costs and fixed assets.
• Optimization also led to better customer service level and delivery reliability because of the new distribution concept and better ability to manage the network with fewer plants and warehouses
• New operational plan for the DC enabled cutting DC's operational costs by 25% and reducing order picking errors

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