Continuous Replenishment Pilot Leads to Significant Freight Cost Reductions

Computer giant IBM Corp. and Transportation|Warehouse Optimization (T|WO), a provider of logistics optimization systems for consumer packaged companies, have partnered to cut transportation costs for Unilever, P & G, Kraft, Nestle, ConAgra, Del Monte, Heinz and more than 20 others on shipments of vendor-managed inventory.

Vendor-managed inventory (VMI) and continuous replenishment programs (CRP) are value-added services many large consumer packaged goods companies provide to their key trading partners. Historically, CRP and VMI can generate a broad range of benefits for both sides of the partnership, ranging from inventory reduction, increased service levels, better promotion planning and management, and improved partner communication. Now, IBM and T|WO have developed a feature that offers added freight savings to those benefits.

The two companies have partnered to implement a truck optimization feature calledAutoVLB (Automatic Vehicle Load Building) for CRP/VMI generated orders. AutoVLB (also known as Super Truck) generates transportation cost savings while increasing trading-partner in-stock and maintaining inventory levels.

“Freight costs are our biggest logistics cost element, and reducing them is a high priority,” says a representative of the pilot client. Clients that leverage IBM’s Continuous Replenishment Service to ship full truckloads will have the option to use AutoVLB to fully optimize their shipments, producing loads that are completely full, which will lead to fewer trucks, and thereby reduce the average freight cost.

By helping the shipper more accurately choose which items to put on the truck, AutoVLB can help lead to improved fill rates while maintaining target turn metrics. This has been achieved through a nine-month client pilot, where the turn rate has remained the same, or in some cases, even improved while the freight costs have declined by 4-8% depending on lane.

Order optimization has additional benefits that include reducing the number of trucks on the road, cutting carbon emissions, and generating real savings inside the warehouse.