New Software on TapBy Kim S. Nash Print
The consumer heavyweight has already divested 700 non-core brandsand it's not nearly done. Efficiency in its supply chain is a top goal.
New Software on Tap
What will help, Berkheimer says, is the installation of a set of sales and distribution applications from SAP, planned for this year and next. Unilever as a whole currently runs 100 separate, complete SAP enterprise resource-planning systems.
Also under way is the building of five megacenter distribution facilities. These behemoths of 1 million square feet each will replace HPCNA's 28 existing warehouses. The old St. Louis warehouse is already closed; Chicago, and perhaps Toronto, will be shuttered by year's end. The megacenters will house all HPCNA products, eliminating the need for truck drivers to shuttle between smaller dispersed buildings.
In the Southeast, a megacenter outside Atlanta has been operating since March. Next up is the opening of a megacenter in Carlisle, Pa., to serve the Northeast. By December, the remaining three will be ready.
Unlike the old buildings, the new ones can accommodate both floor-stacked and racked merchandise. Typically, high-turnover items that are easy to move and that sell quickly, such as bar soap, are stacked on pallets on the floor. Kmart, for example, runs near-continuous promotions on Dove soap and each store in the U.S. gets replenished on a regular schedule automatically without purchase orders.
After the last megacenter is up and bustling at the end of this year, Berkheimer expects to cut freight and warehousing costs by 10% to 12% per year. The megacenters will put everything in just five places, but won't produce much savings compared to the costs of the 28 existing warehouses. "We will have about the same square footage and about as many people as we used to" in warehouses, he says.
Most of the savings will come from more efficient transportation, he predicts. The goal is to transport orders from megacenter to customer in 24 hours or less. HPCNA chose locations for the megacenters by analyzing factors such as where its major customers are, how much product they buy and labor costs and taxes in possible towns.
This summer, the division also plans to cut the number of freight companies it uses from 300 to just 25. "You're spending more money with each carrier, so they're willing to give you a better price," Irwin says.
Berkheimer and Irwin declined to provide specific projections on cost savings. But Doug Thomas, an assistant professor of business logistics at Pennsylvania State University, says the company is on the right track. "For a company like Unilever, which is huge, the economies of scale in warehousing are not going to be nearly as dramatic as in transportation," Thomas says. Real savings will come because Unilever will likely be able to reduce the number of trucks it uses and run them 80% full instead of 60%, Thomas says.
Joint Ship hasn't had a breakneck start, in that fewer customers than imagined want to deal with HPCNA as a single entity. Buyers at many large customers are organized by product category. The person who purchases toothpaste isn't usually the same one who buys laundry detergents.
It's hard to change those historic relationships, says Pete Fader, a professor at the Wharton School of the University of Pennsylvania. "Part of it is an almost-religious thing," Fader says. "Marketing and sales people tend to be so different from logistics people, there's a tremendous cultural change necessary."
But HPCNA presses on with Joint Ship, believing it's the future but also so it can, eventually, pare costs. "By the end of this year, HPCNA will be as fit as any of our competitors out there," Berkheimer vows. "We'll be a long way from being the hobbled, three-legged heritage company we were."
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