Ryder Helps Philip Morris Conquer Polish Distribution Problems

Since Philip Morris hired Ryder Integrated Logistics to develop a new distribution system in Poland, costs have dropped and productivity has improved.

By Thomas A. Foster -- Logistics Management, 10/1/1999

Eastern Europe may have embraced the entrepreneurial spirit since the fall of the Iron Curtain in1990, but basic product distribution remains a major challenge for many companies doing business there. Tobacco-products manufacturer Philip Morris knew about those distribution problems in Poland in 1973, when it first licensed its Marlboro cigarette brand to ZPTK, the former state-owned tobacco manufacturer. When Philip Morris bought ZPTK outright in 1996, it learned that lesson first hand. The company inherited a system based on 275 independent wholesalers who were responsible for distributing its products to retail stores all over the country. Unfortunately, many of the stores they served never received scheduled shipments. Cost was an issue because the distributors were paid on a mileage basis. Warehouses frequently had 30 days' worth of inventory on hand.

"We had no control over the distribution process from the time the product was manufactured and packaged to the point where it was purchased," recalls John Gledhill, Philip Morris's director of sales and distribution in Poland. "We had a distribution process that added cost without adding any value."

Once it recognized the extent of those problems, Philip Morris decided to create a new distribution-center network that it would control. The manufacturer brought in Ryder Integrated Logistics to develop a plan for the optimal number and location of the new distribution centers. The original plan called for 12 DCs that would turn product every six or seven days. It also included detailed specs for a fleet of tractor-trailers, along with specific delivery routes and schedules.

Philip Morris was so pleased with the plan that it hired Ryder to run the distribution system. Today, trailers run in excess of 80 percent full on average. Pallets have been standardized to fit perfectly within the trailers. Security issues--a major concern with each load valued at $500,000--have been addressed. To thwart hijackers, for example, drivers have cellular telephones and check in regularly. Soon, all vehicles will be equipped with satellite tracking equipment. Special fifth wheels prevent thieves from hooking up trailers to non-system tractors. And the trailers have been brightly painted to make them easy to spot if they are stolen.

Gledhill reports that Ryder has helped his company reduce costs and improve service significantly. The number of wholesalers has been reduced by 80 percent, yet the number of delivery points has grown substantially. As a result of this improved performance, other Philip Morris divisions in Ukraine, Romania, Russia, and the Czech Republic are considering hiring Ryder to manage their distribution needs.