Sowing the seeds of savings (page 3)

-- Logistics Management, 4/1/2005

Page 3 of 3

Before it redesigned its distribution network, Monsanto relied on truckload for 70 percent of its overall domestic business (not just seeds) and on less-than-truckload (LTL) for 30 percent. Today 85 percent of its shipments move via truckload carrier. That percentage is even higher for the seed business: 98 percent of inbound and outbound shipments go truckload, while intermodal and LTL claim just 1 percent each.

Monsanto and LMS designed the new transportation strategy not only to cut costs, but also to avoid some common truckload challenges facing shippers today, including capacity constraints, high minimum-shipment and accessorial charges, and deadhead miles. Says Baxa: "I would say the capacity issue is virtually non-existent for us."

Baxa is very pleased with the project's progress to date. He praises both the carriers for their service quality and LMS for its role in developing and implementing the money-saving strategy. But there are even greater savings to be had, and the shipper and 3PL are working on several enhancements.

For example, they are modifying the software to enable more collaboration with the carriers, including automating payment of freight charges. The partners also are working on improving the software's handling of shipment substitutions.

"Monsanto has made tremendous progress within our distribution network over the last six years," Baxa concludes. "Yet we have another six or years to go before we reach 'utopia'—our optimal distribution network. We're halfway there."

Author Information

John Schulz is a veteran transportation journalist and industry consultant.

Monsanto at a Glance

WORLD HEADQUARTERS: St. Louis, Mo.

2004 FISCAL REVENUE: $5.457 billion, up 11 percent from 2003

2004 FISCAL NET INCOME: $267 million, up 293 percent from 2003

KEY BUSINESS UNITS: Seeds and Genomics, generating 42 percent of sales and 53 percent of gross profit in FY 2004; Agricultural Productivity accounted for 58 percent of sales and 47 percent of gross profit in FY 2004

BRAND NAME PRODUCTS: Monsanto's product line includes Roundup herbicide, which is widely used because of its efficiency and environmental profile, and Dekalb and Asgrow, which are brand-name seeds used by farmers. The company also has the most biotechnology products in its three crop focus areas: corn, cotton, and oilseeds. Additional products are Posilac bovine growth hormone, which is the largest-selling product in its field, and lawn and garden herbicides for the residential market.

Lessons Learned

When Monsanto, the St. Louis-based agricultural products company, introduced a continuous-move strategy for some of its truckload shipments, logistics managers took several steps to ensure the new system would be a success. U.S. Packaged Logistics Manager Mark Baxa offers these words of advice based on his company's experience:

Evaluate whether your business model could easily accommodate a continuous-move system or will need adjustments to make it viable. Are there enough regular shipments with consistent, predictable origin and destination points? Are there ample lead times for planning the most efficient routings? Do you already have the critical mass needed, or will you need to partner with another company that ships between the same or similar locations? Will the switch to continuous moves have a positive impact on customer service, or could it have a negative effect?
Manage change across the entire organization, and ensure that everyone involved recognizes the importance of the program to achieving the company's objectives. Baxa takes pains to make sure transportation planners at all of the company's 20 outlying distribution sites are clear about the importance of the initiative. "They have to understand the value of the [software] tool," he says. "They have to understand why the continuous-move concept adds value to Monsanto, its carriers, and the business."
Recognize that the software's solutions won't always be ideal. There are times when it will be necessary to override automated decisions or make adjustments to account for customers' special requests or an unforeseen change in circumstances.
Measurement is a must. Monsanto measures every transportation planner's performance against established criteria, such as the number of shipments proposed and accepted. This allows the company to monitor compliance with the program and ensure that all sites are benefiting.