Reducing costs while sustaining a very high level of customer satisfaction

Heineken France is responsible for various breweries. Its Technical Management asked Agamus Consult to audit the status of its largest brewery’s continuing improvement process and business goals.

Heineken is a structured enterprise that has carried out many best-in-class initiatives throughout the company involving the organization, leadership, continuous improvement (TPM, Team manager, 5 S...), manufacturing and supply chain. Nevertheless, Heineken, like the industry overall, is feeling the effects of dwindling beer consumption in France despite its high-profile marketing presence and clever marketing activities. As a result, sales channels have multiplied, including major chain stores. This has made service more challenging and products and packaging more diverse. Strong seasonal fluctuations in sales presented an added challenge.

During the audit, consultants discovered instances where the brewery’s internal organization and logistical processes were ponderous. They found it necessary to redouble the improvement process by launching on-site initiatives that engage employees and team managers and by optimizing maintenance performance and policies. The two latter points were geared more towards improving facilities use and driving down operating costs.

Heineken opted for Agamus Consult’s proposed ten-month program to optimize logistics. It was scheduled to kick off after the peak sales season. This first project achieved the targeted goals for organizational streamlining by downsizing the workforce by 20 percent, creating a stable, manageable environment, reducing the number of temps, and more. It also achieved process reengineering goals such as re-sequencing operating steps, reorganizing storage areas and building stronger relationships with suppliers. Other efforts included preparing emergency strategies, controlling fluctuations in logistics’ influencing variables, planning the acceptance of goods and containing planning changes’ undesirable consequences.

Logistics personnel play an active role in process optimization teams, immediately carrying out the elaborated measures wherever feasible and expedient. Nevertheless, it takes several weeks to complete some initiatives. The company’s management rose to the challenge by integrating this project into the site’s improvement program and redefining reporting and the indicators required for steering tasks. Management also launched a massive campaign targeting wastefulness to reduce external storage costs, optimize the use of resources, deal with product obsolescence and more.

This first program also mandated closer cooperation with central customer service personnel. Participants quickly discovered the potential benefits of extending the supply chain to other breweries, internal sales channels (France Boissons) and the CHR channel (cafés, hotels, restaurants).

Beginning 12 months later, the second project was a “perspective” study geared to cut distribution logistics costs. It addressed the supply chain extending from production lines to product dispatch for most sales channels and warehouse delivery for the CHR channel.

A workgroup was formed for the project’s duration. It comprised the managers of the various business units, customer service and logistics. Agamus consultants coordinated activities and hosted meetings.

This initiative’s objective was to view the given situation from a new perspective, thereby characterizing logistical costs and performing a volumetric analysis using a database with more than a million order and warehouse data records.

Once the team had assessed the actual situation, it focused on brief studies aimed to identify opportunities for improvement and cutting costs.

On-site observations complemented the volumetric analysis. A software package by a company called Transept enabled the team to view product flows and better examine customer demand to ascertain collection principles and evaluate haulage costs. The audit also addressed the internal sales channel, for which Heineken France carries all the costs.

For Heineken personnel, the initiative to reduce finished goods inventory was the most challenging of all the studies. Indeed, what could be more difficult than drastically reducing stocks in an environment marked by slowing sales and full exposure to the weather’s influence – knowing full well that failing to fill an order on time means losing it!

Pinpoint studies confirmed or confuted proposed savings possibilities. Relying on these insights, the workgroup elaborated different scenarios. The idea was to develop case studies that challenge the status quo (by redefining all the basic conditions, functions and service offerings) and that compare the status quo to best practices.
 
The proposed solution comprised a mix of the two extremes - a compromise between full restructuring and selective adaptation – and a supporting program to reallocate and adapt production resources. It cut distribution supply chain costs 10 to 15 percent within 18 months.
Without disclosing the selected solution’s details, we can report the following: Heineken France’s executive committee approved the principle of a “cell” tasked to manage the entire distribution supply chain, transparently and across all business units.

Specific teams have formed to carry out the program. They are adapting certain processes to the selected solution and configuring supply chain management functions in the EDP system, while factoring interconnections, response times, early warning systems and so forth into the equation. This effort aims to negotiate binding agreements with forwarding agents and enable shared use of logistical resources (platforms, coordinated marketing activities at points of sale, etc.

Although the “perspective” study is still underway, some business units and logistics departments have already begun identifying local savings potential in the logistics chain, of course while upholding the current customer service standard. This shows how responsive company units can be when the enterprise is engaged in a LEAN process.

The program will achieve its crowning success when the distribution supply chain is fully integrated.

Jean-Luc Chalumeau, Agamus Consult