project candy

by Canadian Shipper

For the first five months of 2010, Nestlé Canada recorded a 97.2% on-time performance for the shipment of product from its Brampton, Ont. distribution centre, via CP Rail, to its Western Canadian customers. Weight/cube figures were good, rail delay warnings early, and visible, special containers for protected service were available – Nestlé could hardly be happier.

Behind this excellent performance, however, stands a tremendous effort by Nestlé and CP, as well as by the food giant’s retail customers, to turn around a shipping situation that had gradually deteriorated. Over time, for example, Nestlé and CP’s schedules had slipped out of sync, to the point where trucks sent from its Brampton distribution centre to CP’s Vaughan yard 10 km away would sometimes arrive an hour after that day’s train had left.

Nestlé and CP were not working in concert. “It seemed our heaviest shipping days were the days when we most often faced a shortfall of equipment,” recalls Mike Owens, vice-president of physical logistics for Nestlé Canada.

Some of the actual shipping windows were too short to ever make deliveries on the dates specified and Nestlé was paying late fines for missed appointments at western distribution centres. In addition, in the years leading up to 2007, the year in which the pot boiled over, Nestlé had divested two high-volume businesses in the Canadian market: Carnation condensed milk and fresh ground roasted coffee. The company had replaced them with Novartis Nutrition and Gerber Baby Food, but they generated significantly smaller cases volumes. “We found ourselves faced with eroding shipment volumes, which resulted in decreased average load weight/cube for many of our shipments into Western Canada,” says Owens.

As if the inefficiencies in Nestlé’s supply chain were not enough, the terribly cold winter of 2007-8 roared in, wreaking havoc on the railways’ schedules. The perfect storm had arrived. “This all resulted in abysmal on-time performance. The first two months of 2008 witnessed on-time performance at all-time lows, in the 50 to 60% range, defined as delivering within plus or minus 30 minutes of the appointed time,” Owens says. Nestlé was shipping approximately 2,000 containers a year to Western Canada.

Faced with eroding on-time performance and increasing shipping costs caused by the volume shifts, Nestlé decided to make a thorough analysis of its whole shipping strategy and assembled a group that included one of its route optimization analysts and CP. First, they examined Nestlé’s shipping schedules to see if they made sense. In a number of cases, they did not. For example, Nestlé was shipping to customers, sometimes the same ones, every day of the week.

Once Nestlé and CP identified all of the issues, they began to re-engineer the process. Nestlé’s route engineering analyst studied a year’s worth of shipment data to see if it would make sense to assign three key shipping days for each region in Western Canada. “The days were selected to minimize the in-transit time, to ensure optimal container availability and to align to our customer requirements wherever possible. Once this was complete, it reflected our new ‘Project Candy’ shipping schedule,” Owens explains.

“By going to a schedule of three loads per week into any particular city, there was a greater focus on on-time delivery,” says Doug Miller, manager of food products and intermodal for CP. “Certain days of the week – Wednesday, Thursday and Friday – are busier than other days. We said, ‘If you tender your freight on [other] days, you will have a better probability of success and your overall performance will pick up.’ We were very interested in getting freight off the peak days.” Doing this went a long ways to bring Nestlé’s on-time performance in line with the 95% on-time performance CP reports for its trains.

One change, then, was to move from shipping goods every day to each of six cities in Western Canada – Winnipeg, Regina, Saskatoon, Edmonton, Calgary and Vancouver – to three shipping days per week, per city. Nestlé worked closely with its customers to determine the best primary shipping day for each customer. If a customer required a second or third shipping day, these were based on the remaining two days going to that region. “Without the collaboration of our customers, we would never have been able to bring this initiative to life,” Owens acknowledges.

This rationalization not only gave Nestlé customers more predictability for when product would arrive. Consolidating deliveries also increased weight/cube and reduced shipping costs (since 2008, weight/cube has risen by about 10% to the pre-divestiture volumes).

The predictability also made it easier to obtain rolling stock, explains Owens. “We worked with CP to tailor our schedule to the availability of equipment. We require protected service, such as reefers that cool to 62º F, for confectionary products. There is a limited supply of these special containers. If there is any hold-up in their return to Ontario, we suffer.”

The implementation of the Project Candy schedule also included the ability for Nestlé to forecast the number of containers it requires each day of the week for each Western city. So enabled, Nestlé proactively provides CP a weekly equipment forecast.

Nestlé had put itself solidly on the path to improving its order cycles, efficiency and on-time performance. It rolled out the Project Candy schedule one province at a time, to ensure process stability before moving to the next region. “As we rolled out the program, we began to immediately see the benefits. We finished 2008 with a full-year on-time performance of 77% in Western Canada,” Owens says.

Nestlé, with the assistance of CP, also implemented many other helpful processes. “Historically, our customer order track and trace was sporadic. Our new system ensures consistent track and trace of all shipments and provides customers with advanced notice of any delivery issues,” Owens says. To provide feedback internally on Project Candy’s performance, Nestlé also implemented a system to track month-over-month and year-over year results.

Complementing the new track and trace, CP organized to provide meaningful and visible notification of delays, 24 to 48 hours in advance. “As soon as a disruption occurs, CP notifies us and we communicate to the customers whose orders will be impacted. We then work with the customers to have them reappoint the delivery window to another vendor and reschedule the late load for a new appointment,” Owen explains. “We can proactively communicate delays to our customers. In the past, we would not have been able to provide this length of notice which, in turn, would result in a ‘no show’ fine.”

Owens also notes that CP independently took steps since 2007 to re-establish the priority of intermodal traffic on its lines. Better communication amongst Nestlé, its customers, and CP were critical to the success of Project Candy. “CP was literally in our office for two weeks at the start of Project Candy,” says Dave Corocan, director of national transportation and distribution at Nestlé’s Brampton location. Miller adds: “There is a very tight communication now between Nestlé’s manager responsible for Project Candy and CP.”

CP assigned a western order management services (OMS) representative to Project Candy. “Her job was to watch the daily equipment and make sure it did not fall behind, and to make delivery appointments with customers in Western Canada. If trains fell behind, her responsibility was to contact customers to reschedule. The OMS rep had to participate in daily conference call with Nestlé. The goal of these calls was to have Nestlé and CP collaborate on issue identification and resolution. This had a positive effect on performance.” Miller explains.

Nestlé also worked wit
h its customers to sell the concept. The overarching goal for Project Candy was to improve on-time performance and, in turn, improve on shelf availability of Nestlé products across Western Canada. In a couple of instances, customers were not immediately willing to adopt the proposed Project Candy schedule. “In these cases, the sales and customer service teams met with each customer and walked them through the concept. They built a compelling presentation showing the benefits to each customer’s business through consistent on-time performance. As each customer was brought in line with the Project Candy schedule, we then began to recognize the full on-time improvement, resulting in an on-time performance for the full year in 2009 of 96.1% for Western Canada,” Owens reports.

Looking back at the impetus for Project Candy and its success, Owens observes: “If on-time is a key initiative, work with your supplier to see how you can succeed. When do you want to stay away on particular days and ship on better days? We had some pushback from customers – some of which have multiple buyers – about the new program, but it acted as a guide to align their buyers and reduce the number of deliveries to their own distribution centres, freeing up valuable dock time.

“We want on-shelf availability of our product – whenever and wherever required. The consequence of not being on time is lost sales and business going to competitors. We want the brand on the shelf, in front of the consumer.” CT&L

Carroll McCormick is an award-winning writer who has been covering transportation industry issues and technologies for more than a decade. He is based in Quebec.

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