Unearthing Profitability via Cost to Serve Optimization

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OVERVIEW:

For over 100 years Tessenderlo Group, a 1.6B € diversified industrial organization has been delivering world class products and solutions around agriculture and bio residuals. Presently the organization operates at more than 100 locations across the globe, including 15 production plants and over 100 distribution terminals.

CHALLENGE:

As one can imagine as the population of a market increases so does the demand for agriculture products. In North America Tessenderlo has enjoyed steady organic growth since its inception. However, growth does not come without its challenges. With constraints in their network becoming more evident, Tessenderlo recognized transportation asset availability, accessibility of transport modes, production capacity utilization and operating costs needed to improve. Presented with this daunting task, Tessenderlo quickly realized it was in their best interest to hone in on these challenges by creating a practice dedicated to Supply Chain Analytics.

SOLUTION:

Supply Chain Optimization Scenario

In order to rapidly get their Supply Chain Analytics capabilities off the ground, the Tessenderlo North American team selected anyLogistix as their primary Supply Chain Design and Optimization platform given the exceptional customer service and rapid time-to-value for solutions.

The initial project Tessenderlo tackled was to optimize the cost-to-serve for two of its core product offerings. These products were produced and distributed out of multiple plant locations. This situation created complexities around competing production resources, available storage and transportation assets. With the guidance of the anyLogistix team the Tessenderlo Supply Chain Analytics practice decided on the following approach:

  1. Create a baseline scenario model to best understand the current state of the supply chain with a key focus on:
    • Plant capacity utilization
    • Production costs allocation
    • Transportation spending
    • Terminal distribution costs
  2. Run a series of scenarios to identify an array of optimal methods to serve end customers. The primary objective was to uncover how asset utilization and associated cost (plant, production, storage, transportation, etc.) varied when shifting production & distribution among the various plants.
  3. Review the top 10 scenarios with the Tessenderlo key stakeholder project team to validate the results and decide on the most appropriate future state scenario to implement.

OUTCOME:

By utilizing the anyLogistix platform, the Tessenderlo team achieved the insight and confidence needed to properly redeploy their production and distribution strategy for the two products in North America. Savings identified by the project were approximately $1.4MM USD annually.

Given the success realized by the organization’s first project, the project team will march forward taking a similar approach on the remainder of Tessenderlo’s products and network challenges to identify further opportunities for savings. To ensure continued success and maximize ROI of optimization driven Supply Chain transformations, the organization plans to leverage the anyLogistix platform capabilities on a recurring basis to maintain a pulse on operations while also validating optimization findings.

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