Sowing the seeds of savings (page 2)

-- Logistics Management, 4/1/2005

Page 2 of 3

At first LMS's load planners manually matched carriers and shipments to create continuous moves. Almost immediately they were able to reduce empty miles and improve equipment utilization. But Baxa believed that automating that process would yield even greater benefits. "We knew there were savings of up to 30 percent per shipment leg involved in continuous moves," he says.

Four years ago the company began to phase in an automated system using Web-native transportation management software developed by LMS. The software matches carriers with shipments based on a matrix of origin and destination points, weight, distance, and delivery requirements.

Each night load planners use the system to calculate optimal routing for upcoming moves. By 6:00 a.m., a transportation "blueprint" showing which routes have been chosen for continuous movements is available online. Transportation planners at Monsanto's 20-plus shipping sites review those plans and either accept them or override them if they judge that changes are needed. The round-trip moves then are tendered to the carriers by e-mail or by phone.

Automation was introduced in stages. The first phase combined outbound shipments with inbound replenishment legs. Phase two added customer deliveries to the mix. Last year Monsanto began adding external partners such as suppliers, who also share in the savings.

The program has even been extended to one of Monsanto's competitors, Land O'Lakes. Both companies ship to many of the same locations. (Land O'Lakes is also a customer for some of Monsanto's products.) Their collaboration has allowed Monsanto to increase the number of continuous-move shipments by 20 percent, and has created new opportunities for savings and logistics efficiencies for Land O'Lakes.

There have been some challenges along the way, however. For example, LMS had to modify the software's route-optimization component to reflect Monsanto's specific needs. "While they had the critical mass to make [continuous moves] work, the biggest challenge was distribution from rural area to rural area," Schoemehl of LMS says. "You had to reduce the speed that you built into the optimizer [based on] the number of miles you can drive in one day."

The continuous-move program, moreover, isn't suitable for all of the shipper's seed business. "Not all shipments have the appropriate lead time to allow continuous moves," Baxa says. "Every day we have a subset of shipments that must be tendered to over-the-road carriers or other carriers within Monsanto's mix."

Halfway to "Utopia"

Four years into the continuous-move project, Monsanto can point to a long list of benefits. For one thing, the company is now able to serve exactly the same markets as before with less than half the number of facilities, both owned and outsourced, as before. It does so with far fewer carriers—about 300, down from more than 1,000. About one third of the remaining truckers participate in the continuous-move program. Every continuous-move truckload carrier is paid the same rate, a change that helped Monsanto save 5 to 7 percent on its total transportation spend and around 15 percent on a shipment-by-shipment basis, Baxa says. Continued...

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