Efficient FMCG Supply Chains
1. Description of the Challenge
Producers of fast moving consumer goods generally work with large scale processing equipment in their production lines to manufacture enormous amounts of products, in many cases 24 hours a day, 7 days a week. These consumer goods are shipped on pallets to the warehouses of retailers.
Further downstream the end-customer only buys one or a few items per transaction from supermarkets or e-commerce companies. These organisations do not want to receive the goods in bulk (one SKU per pallet) but prefer to have them in smaller batches that are aligned with their distribution set-up to optimize their supply chains (small inventory, just in time deliveries). The problem is now solved by producing goods in bulk and put them on pallets (one SKU per pallet), ship the pallets to a warehouse and then de-stack and re-stack (multiple SKU’s on a pallet) to get them on the right product carrier in the right volumes and mix. Huge warehouses are built and are being automated to be able to fulfill this function. This requires investments of hundreds of millions of euros and huge operational costs for something that does not add any value to the initial product. It makes the supply chain to the end customer complex with a lot of waste (e.g. unnecessary movement, inventory, waiting and transportation).
The challenge is to develop a concept or model that eliminates the need for such warehouses and stacking, de-stacking and re-stacking. Is it possible that the manufacturer ships pallets from the factory that already have the desired mix of products on them?
2. Expected Outcome
The desired outcome is a concept in which products are leaving a factory and can be shipped directly to a retailer or end-customer.
Some data:
- A manufacturer can run between 5 and 100 production lines simultaneously
- A production line produces between 5 and 40 products per minute (when running optimal, typical OEE is 70%-80%)
Limitations:
- All products are stacked on pallets only, no other product carriers are allowed for transport between facilities
- Production lines cannot be changed to produce more flexible
Suggestions:
- Use product carriers, with pallets on top, to pick up products at the end of production lines
- Transport all products to central equipment where they are stacked on the right pallet
- Bring all products to buffers and pick the right product from there