Last week I explained how individual tastes, compounded by geography, climate and less developed distribution and logistics infrastructure challenge beverage manufacturers in Asia.
This week I look at how to tackle those challenges. Let’s start with a scenario.
Imagine that you produce a popular Malaysian soft drink and you now want to break into the Philippine market. You have to be flexible enough to attack microsegments. So first, you need to modify your recipe to appeal to the notoriously sweet tooth of the Philippine consumer.
Then you need to produce it.
You could either build a new plant in the Philippines or alternate short runs in your existing plants in Malaysia. Both options carry risks. Building a plant requires capital investment, jumping over regulatory hoops, and consideration of higher operating costs in the Philippines. Short production runs challenge operational efficiency with more frequent changeovers, added time lags, and higher transport costs.
A surprisingly simple – and more profitable – third solution
Let’s consider a better option: To improve the planning and scheduling of production runs in your existing plants. For this, you need to get smarter about scheduling and smarter about distribution logistics. In Malaysia, you could parcel the large shipments between multiple plants or lines. For each line, you could schedule bottling of higher sugar content drinks after the less sugar content drinks, in this way reducing the time needed for flushing the lines. Now instead of two runs separated by a prolonged changeover, you can bottle products for both countries.
In the same planning step, you produce an effective plan based on economic quantities and lot sizes, then consolidate the finished product from multiple lines/plants into a single shipment to take advantage of volume discounts offered by the shipping companies. The result? You save on manufacturing costs, rationalize utilization of the existing line capacities, and economize transportation costs. All this directly impacts the net margin contribution – just what your CFO called for.
How to make a COO smile
Planning the entire supply chain in one place synchronizes sourcing and arrival of country-specific packaging with your planned production schedules – another considerable saving in the beverage production business. For example, you already know that you will inject more sugar after lot 300. The subsequent lot numbers will go to the Philippines. The scheduling system had that synchronized with MES printing packaging templates. At the moment of changeover to a more sugary drink, labels automatically stop printing in Malay and start printing in Tagalog.
And keep the COO and the CFO smiling…
Now let’s look at the finished goods logistics. Deciding on production in a remote plant requires full optimization of loads shipped across your distribution network. In that particular area, there is nothing more difficult than consolidating your loads so that you don’t end up paying full price for containers or trucks that travel half-empty. It is your planners’ job to fit many smaller shipments of different sizes and shapes to fill an oblong container box up to its maximum capacity, and then ship it at lowest cost possible from Malaysia to the Philippines. For efficiency, this should be planned and scheduled on the same platform used for sourcing, supply chain and production planning. This is especially important if your supply chain assets, production lines, transportation and warehouse includes assets belonging to or operated by 3rd parties.
Seeing – and controlling – your entire supply chain
All elements of the beverage supply chain affect one another. It follows then, that when different departments within your supply chain each use different planning applications and solutions, you are never are going to arrive at the optimal outcome: the most profitable plan. You will consume too many resources, spend too much money, and achieve less customer satisfaction. Think about your supply chains differently and you and your company will be rewarded with results your competitors can only dream of.
In my next blog I will explore the challenge of logistics planning in more detail. Can’t wait? Find out more about planning and scheduling for the beverages industry or get in touch for some personal feedback on your planning puzzle.