Kraft Foods Takes
Fresh Look at
Recognizing the need to transform its transportation management focus to leverage scale and create a
sustainable advantage, Kraft Foods invested in two initiatives to improve transportation operations.
n 2005, facing a market environment
that was rapidly pushing transportation costs higher, Kraft Foods realized it needed to make a dramatic
change in the way it managed freight.
Working with its supply chain partners,
the company set out to create a sustainable advantage in transportation management, regardless of market conditions,
while keeping cost and service as top priorities.
The company embarked on two major
projects, one focused on truck transportation and a second focused on yard management.
The first initiative was called MOST, an
acronym for Management of Organized
Sustainable Trucks. The inspiration for this
initiative came from Kraft’s private fleet
operations, where the company had realized benefits by managing around “static”
routes. These are routes with a set pattern
of shipments that occur the same day each
week and that normally are executed in
the same way.
Analyzing its overall shipments, Kraft
knew that there was potential for large-scale application of the “static routes” concept, said Mike Cole, director of North
American logistics operations planning at
Kraft Foods, when presenting at the Council of Supply Chain Management Professionals’ annual conference, in October.
Kraft’s shipment volumes are relatively
steady and high throughout the week and
its shipping network is dense, with over
500 origin locations and 6,000 destination
points. The problems were identifying the
best candidates for static routes and implementing the program on a large scale.
The company needed a TMS solution
that could not only find the static routes,
but also integrate with daily execution
and payment activities, to ensure superior execution on a large volume of
transactions, said Cole. In the course of
researching this issue, Kraft discovered
that TMS provider G-Log, now part of
Oracle, was interested in the same business problem. G-Log and Kraft Foods
partnered to develop an application that
could find, execute and pay shipments
on static routes, or Cooperative Routes,
as the partners termed them.
The tool they developed takes shipment volumes, historical or forecasted,
and performs three levels of aggregation—by geography, by time bucket and
by commodity. This information is then
fed into a solver, which determines the
most efficient shipment aggregates to put
together to optimize the entire route. As
orders come into Oracle Transportation
Management (OTM), each is analyzed to
determine its fit within a Cooperative
Route. Manual execution is required only
on an exception basis, enabling the solution to support large volumes without
additional resources. The combination of
identifying static shipment patterns and
executing automatically through OTM
also enables optimal positioning of carriers each day.
Every shipment assigned to a Cooperative Route is tagged with a unique route
identifier, which is carried in the system
and also communicated to the carrier.
Carriers are required to invoice using this
identifier, a practice that enables Kraft to
save more on these shipments vs. standard shipments on the same lane.
By improving the efficiency of its carriers, MOST enabled Kraft to cut 500,000
miles in 2007, resulting in significant dollar
savings and a reduction in Kraft’s supply
chain carbon footprint. Moreover, the program created new areas of collaboration