Alignment with Strategic Direction

• Experiencing an increase in sales and high pressure to reduce

operating cost to continue competing in a market that
considers price as the main competitive factor.
• Distribution costs increased significantly during because of
fuel increases above the general inflation rate.
• The project is part of this strategy and has the goal of a
minimum reduction of 10 percent in total distribution cost.
• It is pointed out that the company is employing a third party
for transportation in 28 percent of the shipments, impacting
unfavorably the cost of transportation.
 Waste Identification Phase
• Waste identification is simplified with the use of value stream
mapping (VSM) of the distribution process
• The distribution process consists of several subprocesses:
– loading finished goods at the plant,
– transporting and unloading them in the CDC at Apodaca
– loading the product at the CDC
– transporting it to RDCs
– unloading product at the RDCs.
• At the RDCs, empty containers are loaded and transported
back to the plant where they are unloaded and cleaned,
terminating the distribution cycle.
• The VSM focuses on the identification of waste related to
transportation vehicles since these are the most expensive
resources used in transportation.
• Several relevant wastes are highlighted:
– High average container waiting time (to be unloaded) at the plant
of 2 hours and 4 minutes.
– High variability of containing waiting time at plant.
– Low capacity utilization factor; 78 percent, from the CDC to
RDCs and returning back to the plant.
– High vehicle waiting time to be unloaded at RDCs of 1.5 hours.
– Low own vehicle utilization (39 percent).
– High employment of transportation out sourcing (28 percent).
• The high utilization level of outsourcing transportation is a result of
the low vehicle time and capacity utilization, and the high levels of
waiting time at the plant and the RDCs. In particular, the waiting time
at the plant originates from a low availability of vehicles for
transporting orders the following day, and this in turn increases the
usage of outsourcing.
 Phase of Waste Reduction Strategy
Definition
• To define possible projects to decrease waste,
it was required to make more detailed analyses
to identify the root causes of waste
 High Waiting Time at the Plant
• After leaving the RDCs where the transportation units are
loaded with empty baskets required to handle frozen foods, they
must go to the plant to unload the baskets so they can be cleaned
and filled with food.
• As previously mentioned, the waiting time for the containers at
the plant is very high, with an average of two hours and four
minutes.
• In some cases containers were left for twenty-three hours,
waiting to be unloaded. Hence, a detailed analysis of the
unloading process was undertaken.
• It is worth noting that they work only the first shift. About 83
percent of the vehicles that come from the RDCs arrive
randomly with a preponderance arriving during the afternoon
and at night, yielding a mismatch with operators' working hours.
Low Container Capacity Utilization
• The low capacity utilization factor of the routes is due to the
deficient performance of various routes. It has been found that
the weighted average capacity factor of the most deficient
routes is about 51 percent. In addition, backhauls to the plant
are currently employed to return baskets used for food
handling.
• These trips could be employed to transport items that originate
from every RDC to the plant, resulting in a potential decrease
in freight cost
 Strategy Implementation
• Based upon the most important areas for improvement found,
the following projects are suggested:
• --Reassigning excess vehicles to zones that currently use
outsourcing.
• --Improving unloading process to reduce container waiting
time at plants.
• --Temporal order consolidation, vehicle routing, and
collaboration with other firms to increase capacity utilization.
• In this section, a brief description of the implementation of
these projects is presented.
Reduction of Waiting Time at Plant
• The main causes found for waiting time waste were staff
shortages in the unloading area and the lack of an arrival
schedule of containers with empty baskets. For these reasons,
the transportation management organization made staff
changes by hiring two additional operators in the unloading
area and an extra driver for the containers during the night
shift.
 Improving Capacity Utilization
• Temporal order consolidation--The primary distribution
network includes both warehouses and cross docking facilities.
• The attractiveness of this project was determined by the low
cost of capital of keeping inventory compared to the high
freight levels.
• The benefit obtained with this project is estimated to be a
reduction of 25 percent of the shipments carried to warehouses
(equivalent to 1.8 million pesos per year). In order to
implement this project it was necessary to coordinate with
each RDC to determine daily requirements with a rolling time
window of one week
• Collaboration with third parties--The option of collaborating
was explored with third parties specializing in transporting
refrigerated foods, with an emphasis on raw materials required
by the firm.
 Impact
• Outsourcing trips have been reduced by 17 percent due
primarily to a 78 percent reduction of container waiting time at
the plants, and the reassignment of excess vehicles in the
northeastern zone to other zones.
• The temporal order consolidation resulted in savings of the
order of three million pesos for November and December
2008.
• Finally, it is estimated that the firm will save about 12.3
million pesos in future budgeted INVESTMENT because of
better vehicle capacity utilization and availability of vehicles.
 CONCLUSIONS
• This note deals with an application of lean
methodology to the field of transportation. It
contributes with an approach to identify and eliminate
specific waste associated with the transportation of
goods.
• This scheme is applied to the primary phase of the
distribution network of a Mexican producer of
refrigerated food.
• The strategy for reducing waste is in the process of
being implemented.
 Improvements Advance
Summary
Concept Impact Status
Reduction of container 78 percent Implemented
waiting time
Reduction of outsourcing 17 percent Implemented
trips
Increase of firm's fleet 21 percent Estimated
utilization
Projected investment 12.3 million Estimated
savings pesos