If you've been following U.S. business trends recently, then you know that "getting bigger through buyouts" is the current mantra in many industries. And if you're a logistics manager for a company that subscribes to that philosophy, then you also know that acquisitions can create logistical challenges.

Mark Baxa, U.S. packaged logistics managerfor Monsanto Company, knows that very well. When the St. Louis-based biotech business bought three seed companies and added their distribution channels to its existing system, Baxa and his colleagues found themselves with several problems on their hands.

"We had over 70 distribution points from which we distributed seed," recalls the 23-year veteran of sales, marketing, product management, and logistics. "We owned facilities and had some [shared] production sites. It was a very complex network of manufacturing and distribution."

Each one of those distribution points had its own carrier base—more than 1,000 motor carriers in all. That was too unwieldy and inefficient, and in 2000 Monsanto launched an initiative to reconfigure its Midwest seed distribution network.

Working closely with a third-party logistics (3PL) partner, the company centralized its seed unit's operations, slashed the number of truckload carriers it was using, and redesigned its distribution strategy to reduce empty miles. The result: Efficiency is up, transportation costs are down, and in these days of tight truckload capacity, Monsanto has all the capacity it needs.

Monsanto, which reported $5.5 billion in sales last year, produces fertilizer, seed, and agricultural chemicals and conducts research in plant genomics and biotechnology. (The "new" Monsanto is a spin-off from the original chemical and pharmaceutical company, now called Pharmacia.) Monsanto ships to around 5,000 retail locations in rural areas throughout the United States. The seed segment is highly seasonal: Nearly 95 percent of that business is shipped in an eight-month period each year.

That time pressure, along with the inefficiencies inherent in the newly combined transportation networks, made it imperative that Monsanto improve distribution for its growing seed business. Baxa and his colleagues turned to St. Louis-based Logistics Management Solutions (LMS) for help. LMS had been working with Monsanto since 1998; it has approximately 20 employees on-site at Monsanto's headquarters, most of them involved in a centralized distribution program.

Monsanto often worked with small, independent motor carriers that were well suited to its rural customer base. Most operate 50 trucks or fewer, with an average size of 10 to 15 tractors. "Some of these guys are actually farmers who may own three or four trucks," notes LMS President and CEO Dennis Schoemehl.

When the shipper and 3PL reviewed the existing transportation network, it became clear that those relationships should be preserved. For one thing, the small truckers understand Monsanto's customers very well, says Schoemehl. They also are very service-conscious and know how to operate in the typical seed buyer's environment. Those carriers typically use 48-foot dry vans instead of 53-footers, and carry pallet jacks to serve locations that don't have loading docks and need drivers to assist in unloading, Baxa explains. "We have some locations that are relatively unsophisticated from a product-handling standpoint. That's why we need such a highly service-oriented group of carriers," he says.

Small, rural motor carriers may have been ideal for many jobs, but there were far too many of them and they weren't being efficiently utilized. Empty backhauls were common, as is typical with a domiciled carrier base serving multiple shipping sites. Service quality was high, but so were costs.

To address those problems, LMS and Monsanto developed a "continuous move" routing system. This approach takes a series of one-way moves and groups them to create round trips that reduce or eliminate deadhead miles. (For an example of a continuous move, see the map at left.)

Transportation planners at Monsanto's facilities, who were getting 98 percent on-time performance from their existing carriers, were concerned that mechanical breakdowns and weather delays would have a greater effect on round-trip deliveries than they did on traditional one-way moves. The new strategy also required cutting back the number of carriers by 30 percent. "They weren't sure how it would affect on-time pickup and delivery," says Baxa. "There was some resistance, but nobody said, 'Let's not do it.' " Continued...

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