Stephen Zujkowski, the VP of Supply Chain Management and IT at Brambles CHEP, spoke at JDA’s Focus 2015 event last week. CHEP is the leading provider of pallet, container, and crate pooling services for many of the world’s largest supply chains. In other words, CHEP makes sure companies have the pallets they need when they need them. And when manufacturers leased pallets eventually end up downstream at some retail store, CHEP goes and gets them, refurbishes them, and they again become available for reuse in the upstream portion of the supply chain.
This is an incredibly complex and dynamic supply chain. CHEP owns 500 million pallets (and other forms of returnable containers) that are used by customers around the world. In Europe, the complexity is illustrated by the fact that they have 50 SKUs, 200 service centers, 15,000 ship to locations, and 250,000 collection points! Customers need to give them three days of lead time to get the pallets to the needed location, but 30 percent of the orders change within this “frozen” window. Further, it is difficult to have an accurate forecast for where pallets will be needed at the location level and yet they must achieve very high service levels. If pallets are not available when a manufacturer needs them, and they need to shut down a line, CHEP has lost a customer. Consequently, they have “tremendous” freight costs to achieve their service levels.
To solve this problem they implemented various JDA solutions. But the key one was JDA Production and Sourcing Optimization, which JDA is hosting for them. The optimization engine balances demand and supply in order to minimize total network costs inclusive of transportation, service center costs (to sort and repair pallets), and inventory carrying/storage costs.
They are too early in their journey to give results yet because this solution has been implemented for less than a year. Their goal is to reduce total transit distances by 15 percent, which would give them a very good return on investment.
Usually I would not write a case study up if the results are not yet known. But here is what I find interesting. Production and Sourcing Optimization use to be a network strategic planning product! In other words, a company would use this product to do strategic planning once a year or so. But the product has scaled to the point where it can do a network solve on a daily basis, creating a plan that goes out two weeks for where pallets will be collected, which service center those pallets will be returned to, and which customer sites refurbished pallets will be delivered to.
As in-memory technology continues to scale, the line separating planning and execution is beginning to disappear. That has long been true for transportation management solutions. Now that line is disappearing in network and distribution planning as well.