Beverage behemoth Coca-Cola Amatil has revealed a major overhaul for how it gets products to retail shelves, optimising the way orders are delivered and opening possibilities to respond in real-time to unforeseen demand, such as during a run of hot weather.
The large-scale project is currently in its second of three phases, and sees the drinks maker deploying - and adding functionality to - SAP Transport Management (TM) through a co-innovation arrangement with the German business software giant.
The push to deliver much faster is a major logistics effort. Coca-Cola Amatil (CCA) distributes products via 500 trucks, trains and ships a day.
Those products travel in either bulk - as fully-loaded pallets - or in smaller amounts for direct delivery to cafes, mixed businesses and the like nationwide.
Through the project, CCA is bringing together 10 separate freight and delivery networks it operates and eliminating paper and Excel-based planning and optimisation.
This will have a number of benefits, from improving visibility of where stock is in the delivery network to ensuring that trucks leave a delivery centre without empty space and that stock is shipped via an optimal route and at the “best available rate”.
It will also ultimately enable CCA to respond in real-time to changes in demand and always ensure that its retailers have enough stock to sell.
CCA’s supply chain solution delivery manager Keith Harrison spelled out the mechanics of the overhaul at SAP’s Sapphire 2019 conference.
The real time overhaul is being run with resources from CCA, SAP and a partner, Novigo.
The first phase - which saw the SAP TM software implemented for CCA’s bulk supply chain operations - is bedded down and has been live for the past year.
In the second phase, the SAP system is being applied to direct store deliveries, where CCA trucks essentially deliver to “99 percent of all postcodes in Australia every two weeks”.
Harrison said applying TM in this context revealed “gaps” in the product that CCA has now addressed directly via the co-innovation arrangement with SAP.
The changes that CCA worked on are part of the 9.6 release of the SAP TM software, meaning any SAP TM customers worldwide will also be able to also use the functionality.
Harrison said CCA is almost finished a “technical upgrade” of TM to version 9.6, work which has been underway since December of last year.
From this month - effectively once Harrison returns to Australia from the SAP conference - CCA will “actually start the configuration of the product for our own businesses”.
It expects to have this configured version of 9.6 live - and therefore the benefits to flow for its route deliveries - in early 2020.
A more futuristic third phase will then follow, where TM will shift from being a supply chain optimisation and planning tool to a “sales and customer experience tool”, helping CCA move to real-time planning and decision making.
More broadly, CCA is also now looking at TM for group-wide use; in addition to Australia, CCA has operations in New Zealand, Indonesia and Fiji.
The Indonesian operations are now rolling out a simplified version of TM for their own requirements.
“We actually see this becoming more of a group-wide solution that'll be operating in all of our businesses going forward,” Harrison said.
Building a new base
Harrison described the first phase of the project as “foundational”, given it laid a technological base for supply chain optimisation across CCA’s operations.
He said the company had adopted a “crawl-walk-run” philosophy when defining its three-phase implementation.
The focus of phase one was on CCA’s bulk operations. “What we call bulk is all our full pallets of products, based on full truck loads, and moved between our DCs [delivery centres] and large supermarkets or between our own sites,” he said.
Harrison said that the bulk operations are, by nature, a lot simpler than direct store deliveries, although both types of freight and delivery experienced roughly similar challenges.
The SAP TM solution is not standalone but rather runs as an integrated piece of software with CCA’s SAP ECC enterprise resource planning system as well as the company’s warehouse management system.
“TM is fully integrated back into ECC, such that once you've actually completed and settled a load, those costs flow right back through all the ECC documents so you can actually see - depending on what rules and values you've set up - the cost to serve that particular line item to that particular customer,” Harrison said.
The deployment of TM centralised freight planning and optimisation across CCA for the first time. Previously, the function was devolved to the states and territories, which used Excel spreadsheets for the purpose.
“In one simple cockpit, we [now] have complete visibility of the entire transportation demand we need to move,” Harrison said.
“That's actually key to start with - if you don't have the complete picture, then you can't actually plan the trucks out completely, and you can't automate the process.
“So that was quite critical for us to get that part [right].”
Once that was done, CCA was able to move onto transport planning: that is, working out the mechanics of meeting a customer order.
“We have all the information that allows us to be able to plan that [order fulfilment] right back to the vehicle we need to load, how many pallets we can put on that [transport], and when that needs to be loaded by,” Harrison said.
CCA also wanted to use TM to improve its utilisation of space available in trucks.
The company can now see what type of truck is being used by its contracted transport providers and the truck’s capacity in advance so they can ensure it leaves with as full a load as possible.
This has been particularly useful in identifying the arrival of 32 pallet B-Doubles since they have a “mezzanine layer” where extra pallets can be placed, assuming the extras meet overall weight and volume requirements.
The TM system is designed to ensure trucks don’t leave a CCA facility overweight, facing the prospect of being turned around at a weigh station and sent back for load re-planning.
“We have 100 percent compliance on our weights now across our weigh stations,” Harrison said.
“That may seem a minor thing, but when you think about it, that's where a lot of the hidden costs are in your supply chain.
“The truck turns up at a weigh station, fails the weigh station, it's got to be turned around, someone's got to replan that truck so we've got to take stuff off, we miss our window with our customer, and our stock doesn't show up on shelves. That's a simple analogy of what may happen in that case.”
CCA employees see visualisations that show if a load is balanced across all of a truck’s axles. The visuals use a traffic-light system to warn operators of unbalanced or overweight loads.
They can also split large loads on multi-modal transport.
“We had cases where we were planning on sending 100 pallets to one of our other sites, but not all of those pallets were needed by a certain date,” Harrison said.
“In a prior life before TM had come, you'd have five trucks come, 20 pallets in each truck and we'd send the five trucks up there.
“Now with TM there are planning tools, visibility and cost options that you can set up as a standard configuration on the system that allows you to, say, send four of those trucks and the rest of it can go by rail or sea which is a much cheaper option.
“This ensures that the stock gets to the right place when it needs to be there at the least-cost option. There are quite considerable cost savings there.”
The TM system is also designed to bring together all the paperwork required for a shipment or delivery from various systems and print it in one place at one time.
Carriers and transport operators get the benefits of the TM system via a collaboration portal that uses SAP Fiori for its interface.
Through the portal, CCA handles financial issues that might arise in delivery such as dispute resolution.
“We have agreements with our freight providers whereby they have a certain period of time to respond to any charges [imposed],” Harrison said.
“If they have disputes they get settled through this portal. The carriers are paid faster, there's less open items, and it's all done with minimal effort these days whereas it used to take quite a considerable number of people to do this.”
With a year of usage of TM in the bulk operations side of CCA’s supply chain, Harrison said that substantial results had been achieved to date.
Whereas it could take between 45 minutes and an hour to process a stock order before - “that would involve getting the order in there, planning where the stock was, and how many pallets we'd fit on the truck” - that process now “takes us less than five minutes,” Harrison said.
Utilisation numbers have improved from the “low 90 percents” to the “high 90 percents” now that load planning is fully automated.
“We get much more utilisation now and that just equates to real dollars,” Harrison said. “Essentially, we need less trucks to move the same amount of product.”
Closing gaps in SAP
CCA is now ensconced in phase two of the project, applying what was built for bulk operations to its direct store delivery operations.
Harrison said that when CCA first started this work, it “identified there were some gaps in the TM product” and took the opportunity to partner with SAP to get those gaps resolved natively.
In this side of the supply chain, Harrison said CCA is most concerned with pallet building and load optimisation for its delivery routes.
Pallet building is important because the orders are small and the company’s products - when picked and placed onto the same pallet - could cause problems since a carton of Coke varies substantially in weight to a carton of coffee pods.
“Remember, these are customers that are buying one carton of Coke, maybe one carton of coffee pods and things like that. How do we get that efficiently onto a pallet and then onto a truck so we can efficiently unload it when they get there,” Harrison said.
CCA wanted to avoid making the driver pick the cartons off different pallets in the back of the delivery vehicle.
“This is where we needed to get some some really good smarts going in SAP to be able to plan that out upfront, just like we did with our bulk operations,” he said.
“Full pallets are nice and easy but with the route stuff, it’s not so easy.”
CCA worked directly with SAP in Germany over the course of a year to determine those smarts and have them added into the TM product natively.
The result of that is that CCA now expects to be able to optimise the way it builds pallets for these kinds of smaller deliveries.
“In some cases we may end up building pallets where we have four towers on a pallet, so we have four separate customer orders that we can put on a pallet safely, so that its not going to fall over, it's not to crush [other product] or cause problems for a driver,” Harrison said.
It should also mean that pallets of product destined for regional areas won’t need to be disassembled and repacked somewhere in the region before the final delivery can be completed.
The TM system is also designed to build in appropriate amounts of time to complete these smaller deliveries into the driver’s schedule.
Replanning deliveries on-the-fly
Harrison said that CCA expected to move into the ‘run’ phase of its transport management and optimisation project sometime after early 2020.
“This is where we start to gain the potential real benefits on what can get out of this,” he said.
“This gives us the ability to use TM as a sales and customer experience tool, whereby we will be able to make decisions on-the-fly and be able to interact in real time in our system”.
Harrison cited a hypothetical example where a retail customer might sell out of Coca-Cola’s products owing to a particularly warm day, and therefore be left short, well before the next scheduled delivery of product.
In this situation, CCA will be able to check its transport network for available capacity on a nearby route delivery vehicle.
“If the retailer is a gold [tiered] customer, for example, we can offer to get them a new order for free that same afternoon or tomorrow,” Harrison said.
“All those choices will be available to us to make in real time.”
Harrison also expects to be able to re-plan a truck “at the last minute”. This is currently impossible because transport planning is done as a batch process. “We’re planning today for tomorrow,” Harrison said, “and at that stage we're not able to react.”
But, in the case of an unusually warm day, this might not be predicted and planned for.
“A lot of these events that cause a change in demand for us happen without notice,” Harrison said.
“So this is where the real benefit comes from being able to leverage our fleets to increase our volume and use it as a customer service aspect.
“If we're sending a truck half-full we can send it through and proactively plan and offer other orders to customers as we go through. We’re also able to provide to that customer what they need at that point in time.”
Harrison added that this future state could also allow CCA to experiment with “time of day” pricing of its products.
Last area of supply chain optimisation
Harrison highlighted the considerable size and complexity of the project, including the work still to come.
He said CCA was using an Agile rather than waterfall-based deployment methodology to reduce the risk of benefits being delayed or not being delivered.
“Agile works really well because it allows us to go through the sprint cycle, do the showcase with the business, get them involved, they get to see what they're getting and we correct as we go,” he said.
“TM projects are big projects, make no mistake. This is not something you're going to do in a month or two.”
However, Harrison added that transport management, done right, offered rich rewards. It is, he noted, one of the last areas of supply chain where substantial benefits could still be realised.
“This is one of the last areas of supply chain where there's some real significant financial benefits available to be had,” he said.
“Supply chains have been chewed for so many years now. There's really only a few areas left,” he said, citing warehouse management, automation, and TM among those.
“It's taken a while for the technology to catch up and the ability to process the data. Now we have the ability to actually optimise our transport planning.”