Cutting Costs, Growing Footprints

Logistics scholar Bob Delaney notes that the theory of just-in-time replenishment has driven trends in the industry for a lot longer than many think -- ever since 1919 in fact, when eventual Procter & Gamble CEO Richard Dupree decreed, "Sell so that we will be filling retail shelves as they become empty."
        As it happens, P&G is just concluding a five-year restructuring program that has included a re-engineered distribution network. Among its facilities is a 1-million-sq.-ft. (92,900-sq.-m.) super-center in the same Gateway Commerce Park in southern Illinois that is home to a similar-sized facility for rival Unilever.

ProLogis is about to complete this new distribution center for General Motors in Denver, just a small part of a planned logistics park.

        Delaney's 14th annual "State of Logistics Report," released in June 2003 and subsidized by ProLogis and his own company Cass Information Systems, shows that the cost of logistics in the U.S. in 2002 was some $910 billion, down $47 billion from 2001 and down $93 billion from 2000.
        That did not keep ProLogis from growing its owned and managed facility assets by more than 21 percent, to a total of more than 226 million sq. ft. (21 million sq. m.) in more than 1,760 facilities worldwide. Those assets are worth more than $4.6 billion.
        Delaney says savings of from 10 to 20 percent are possible through re-eingineering the process. He cites end-user examples of General Motors and Cummins Engine. Anglo-Dutch consumer product giant Unilever has realized savings of 7 percent in transportation, administration and facility costs by moving from 15 U.S. warehouses to five super-warehouses that total 4.8 million sq. ft. (445,920 sq. m.). Even with the reduction in locations, the company has realized a 15-percent improvement in customer service and can deliver to most of those customers within one day.

Projects are Natural Progression

AECOM's Franco Eleuteri notes that corporate management of "hard assets" goes hand in hand with its management of "soft assets" when it comes to logistics. A perfect example came in June, when Toyota announced a $1.7-billion investment in its information systems in order to globally standardize its just-in-time parts delivery system. That kind of optimization integration is also evident in the facility planning of RR Donnelley Logistics, a $1-billion business unit of the printing giant.

See the SITES Council of Logistics Management www.clm1.org Cass Information Systems www.cassinfo.com Logistics World www.logisticsworld.com Institute of Logistics and Transport www.iolt.org.uk American Society of Transport and Logistics www.astl.org Institute of Logistical Management www.logistics-edu.com Supply Chain Council www.supply-chain.org

Haddon Allen

        Haddon Allen, Senior Vice President, Operations, for RR Donnelley Logistics, says that, depending on a company's business model, transportation costs could go to higher than 65 percent of the total cost of doing business. "Contrast this with your typical manufacturing organization where transportation amounts to somewhere in the area of 15 to 20 percent, and you'll see why site selection is such a critical issue for our business," he says.
        The company now stands at 40 facilities laid out in a hub-and-spoke design, but as Swanstrom suggested, changing the makeup of the company makes the centroids shift. In the industrial world, that comes from M&A activity, and for RR Donnelly Logistics, it also comes from an array of services that ranges from small parcel, print and mail distribution to returns and merchandise management. All while keeping in mind the print and distribution needs of the parent company, which generates millions of tons of outbound printed matter each year.
        Building scale, minimizing cartage and paying attention to customer demographics are the company's primary criteria in plotting prospective facility locations, in addition to key factors like carrier availability. All of those came together in the recent selection of York, Pa., as the site for a 670,000-sq.-ft. (62,243-sq.-m.) "SuperCenter," a term coined to identify centers that combine print and package distribution for more efficient loads. The company was already well-versed in the local business and labor climate, having operated a smaller center in York as well as the parent company's large printing operation in nearby Lancaster.
        "The site was an existing industrial site which had been vacant for eight years," says Allen of the former Caterpillar location. "Numerous entities had tried to utilize the location previously, but for various reasons, including environmental, ownership and deed, and community issues, were unable to succeed."
        Now Donnelley Logistics, fueled by fresh acquisitions in the Southeast and an omnipresent mandate for continuous improvement, is well on its way to optimal success.