Syngenta Uses COST2SERV
February 27, 2014
Syngenta Advanced Modelling Evaluates Optimisation Strategies for Complex International Distribution Network
Today’s Issues and Tomorrow’s Challenges
World leading agribusiness, Syngenta, operated a highly complex European distribution network, the costs of which were substantial. No single product was produced at more than one of its seven manufacturing sites in Western Europe but varying groups of products were sent into different markets in a two-stage process, from manufacturing warehouses to secondary distribution warehouses in the destination country and then onto final customers. Increasingly, capacity at the manufacturing warehouses had come under pressure. Furthermore, the predicted market growth in Eastern Europe implied the need for new distribution models to manage costs and respond to production and pan-European transportation constraints. Syngenta recognised the need, firstly, to understand the cost dynamics of its existing supply chain, in particular its primary supply chain into the secondary warehouses. Equally, the company needed to develop a logistics infrastructure for the future based on penetrating analyses of the proposed options and their impact on costs.
Understanding Current Cost Dynamics
Syngenta believed that computer modelling could provide the company with these detailed insights and invited Cirrus Logistics to apply its COST2SERV Network Strategy tool to the task. COST2SERV combines optimisation techniques with powerful reporting and analysis technology to provide a vital toolkit for examining the supply chain. The product family includes Consignment Fulfilment and Supply Chain Simulation models as well as Network Strategy. Establishing the as-is network model was complex. It involved identifying and configuring the correct data across the entire supply chain in order to separate out all of the primary and secondary distribution costs. The result came in at under 5% difference of the reported costs and delivered the invaluable benefit to Syngenta of understanding the mix and interactions of its logistics costs in greater depth. It also provided a stable and coherent platform that could be used for modelling and testing future business scenarios.
Modelling Four Scenarios For Future Strategies
Firstly, the advantages of direct deliveries were put through the model, testing a number of ‘What ifs?’ for multi-product deliveries to different customers. The benefits were found to vary from one country to another and also to be highly dependent on the ability of the primary manufacturing warehouse to consolidate loads.
Another exercise considered the value of optimising secondary distribution within countries. For example, customers in Germany may currently receive deliveries from several secondary warehouses. The COST2SERV model identified the best single depot for each customer with the potential of reducing total supply chain costs and miles run. ‘What if?’ experimental modelling was also undertaken reflecting the projected growth and challenges in the marketplace over the next five years. Using the as-is model, capacity constraints at some of the primary warehouses were tested and options for reducing additional primary transport costs caused by the market shift eastward were considered.
These included the effects of moving product between manufacturing sites as well as developing multi-modal links. The fourth scenario looked at introducing a new RDC as a hub in both direct and two-stage distribution networks and at its cost impact on the total supply chain.
A Basis For Managing Change Successfully
The COST2SERV project was completed over five months. It gave the Syngenta logistics team an unprecedented insight into the costs of its distribution activities across Europe and enabled it to break down all key volume and cost drivers, reconcile base cost models with actuals and consider various options objectively. The accessibility of the software’s visuals proved especially helpful in presenting the implications to senior colleagues outside the logistics team and Syngenta management is now distilling the findings into the further development of its distribution strategy.
“COST2SERV began by giving us unprecedented visibility into the cost dynamics of our current Europe wide logistics. It has since given us invaluable insight into areas where we can optimise our supply chain, which will undoubtedly inform our future strategy.”
EAME Operations Manager