Unilever Shapes Up Shipping

Thanks to custom data-analysis tools combined with bidding- and contract-management software, Unilever N.V.'s home and personal-care division in North America has cut from 100 to 30 the number of carriers it uses to transport production freight, replenish distribution centers, and deliver products to customers. The net result? As much as a 10% reduction in costs on truckload transportation services. That's significant savings for a division that spends as much as $250 million annually on all transportation services.

Now the company, with $46.6 billion in revenue last year, plans to use the same technology to simplify logistics and cut transportation costs for its foods division.

Chuck Irwin, director of transportation for Unilever's home and personal-care division, says the company decided to consolidate its carriers because it was missing the opportunity to leverage scale. "We were handling our $250 million-a-year expenses in transportation $20 million at a time, rather than approaching the market as a $250 million-a-year customer," Irwin says.

Unilever hired Tigris Consulting, a supply-chain consulting and services firm, to help it whittle down the division's transportation network of 100 carriers, 7,000 shipping lanes, and 200,000 shipments a year. Tigris helped Unilever build custom applications that let it re-examine all the carriers it was using and then find the best mix to suit the company's needs. During the first phase of the project, Unilever implemented a request-for-information bidding process on the Web. It used a request-for-pricing process to let selected carriers present their contracts. Tigris also helped Unilever build custom analysis and optimization software to scrutinize several million pieces of information to decide how to allocate business across the final list of carriers chosen.

The three-year project has done more than reduce transportation costs and complexity. Throughout the process, Unilever has refined its key performance indicators--the factors that help measure transportation and shipping performance--and in June, the home and personal-care division launched a new key-performance-indicator process. Now, every Tuesday, a report is issued to Unilever managers and carriers that scores transportation performance.

The project also has evolved into Unilever's Transportation Business Center, a Web-based system for managing and sharing transportation information with all relevant parties. As part of the system, Unilever has launched a distribution module that lets carriers access shipping instructions on the Internet. "This will improve on-time performance from the very first load," Irwin says. Unilever also has launched a contract-management module that automates and audits the creation of contracts and changes made to them.

The custom apps serving Unilever's transportation and shipping business are the foundation for further improvements. The company may be able to enforce EDI transaction compliance, and if a carrier fails to submit an EDI file that documents that a shipment has been completed, Unilever could hold off payment. Or it could reward carriers that always meet EDI compliance.

That kind of progress is far more important than simple cost savings. "Unilever focuses much more on the nonprice attributes that carriers can provide," says David Camp, Tigris' chief marketing officer. "They certainly want to save money, and lots of money, but service and ensuring that customer requirements are met are foremost."

Unilever's Irwin agrees. "Even if the savings had been zero, we still would have done this. The reduction in complexity, the process enforcement gains, and the optimized performance make it all worth it."