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Optimized Transportation Routing
By optimizing its network, a food manufacturer and distributor
was able to reduce its annual transportation costs by 10%.
By Michael Pedersen
CASE STUDY
Optimized Transportation Routing: A Case Study
Leadership at Nissin Foods, a Gardena, CA-based prepared foods manufacturer, was
tasked to materially reduce year-over-year transportation spend. The organization needed
to implement a strategy to optimize its transportation network, yet it had no in-house team
focused on network engineering or design.
Enter Yusen Logistics’ Supply Chain Solutions Team. Yusen Logistics has a proven record
of engineered solutions that enhance performance and drive out costly inefficiencies from its
client’s supply chains. A well-defined approach to solutions engineering involves a clearly defined
analytical approach with logical, sequential phases that produce consistent results.
Analysis and Goal Setting
Nissin Foods is a large scale manufacturer and distributor of convenient instant foods. It ships
millions of cases of product over 12 million miles to almost 1,000 locations in the U.S. each year.
Yusen Logistics’ first step in its network optimization process was to evaluate and standardize
the data for Nissin Foods’ annual shipping volume to ensure that locations, quantities, distances
and rates were properly interpreted during the analysis phases. Redundant information was
removed and relevant data was standardized.
Analysis of Nissin Foods’ product shipments
Percentage of units
shipped by mode
Percentage of
cost by mode
<1%
8%
<1%
56%
TL
LTL
Rail
Ocean
92%
42%
<1%
<1%
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Comparison of transportation modes
Transport
Mode
Total LTL moves
represented
less than 10%
of total volume
shipped, but
more than
40% of overall
transportation
costs.
Ship Quantity
Percent of total
Shipment Weight
Percent of total
Truckload
Less than truckload
Rail
Ocean
91.4%
8.0%
0.5%
0.1%
91.6%
7.9%
0.4%
0.1%
Total
100%
100%
Linehaul Cost
Percent of total
56.2%
42.0%
1.0%
0.8%
100%
Analysis for Nissin Foods revealed that the company had two U.S.-based production facilities,
one on the East Coast in Middletown, PA, and another on the West Coast in Gardena, CA,
serving the eastern and western U.S. respectively. When evaluating allocation of cargo across
historical Less Than Truckload (LTL), Truckload (TL), Intermodal (IMDL) and rail modes, the total
LTL moves represented less than 10% of total shipped volume, but more than 40% of total
overall transportation cost.
A goal-setting meeting was held with Nissin Foods to review the results of the analysis and
ensure that goals were aligned. During the meeting, it was determined that the TL volume was
being consistently optimized with regard to loaded volume and routing, but that LTL volume
could provide significant opportunities for optimization through consolidation methodologies. As
a result, they decided to focus specifically on reducing the LTL spend for the organization.
Network modeling was undertaken by Yusen Logistics’ engineers to leverage Nissin Foods’
historical data and create a model of its distribution network including manufacturing sites,
consolidation and distribution centers, cross docks, ports, ramps and final delivery locations. The
company’s shipment volume was run through the model to provide an accurate representation
of the current network and measures of time, cost and volume as products flow through the
existing supply chain.
Network distribution model
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Any number of
scenarios can
be modeled and
analyzed so the
best possible
network design
that yields
the highest
performance
can be virtually
evaluated.
Creating ‘What If’ Scenarios
Once the network model design is complete, Yusen Logistics’ engineers can create “what if”
scenarios to measure the cost and service impacts of strategic changes to the network and
accurately determine if those changes result in increased efficiencies at favorable costs. For
example, the centers of customer demand can be measured to determine if distribution facilities
are properly positioned. Could positioning distribution closer to customer demand reduce overall
transportation cost? Would demand positioning result in more efficient service times to better
respond to critical customer delivery requirements? Any number of scenarios can be modeled
and analyzed so the best possible network design that yields the highest performance can be
virtually evaluated.
For Nissin Foods, it was determined that a large number of individual LTL shipments were
traveling long distances from the existing distribution centers at a high unit cost. Yusen Logistics’
engineering team asked “what if” Nissin Foods built optimized, consolidated multi-order inbound
full truckload shipments that would move consolidated shipments closer to customer demand
and then utilize LTL crossdocks proximate to demand for final deconsolidation and shorthaul
LTL delivery to the end customer. The network model allowed the engineers to identify areas of
concentrated demand that would yield results.
Hypothetical points added to the model
Hypothetical distribution points were added to the model and the volume was run and measured
to determine the cost, adding both the cost of the inbound consolidation runs and the LTL
distribution to the final customer.
The model was subjected to variations in weekly product flows, peaks and seasonality, in
order to realistically test the new network for capacity and sustainability. Decisions were made
regarding weekly flows and when consolidation or direct ship would yield the greatest benefit.
The new modeling options were then measured against the baseline cost to determine the effect
of the network change with regard to key metrics.
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Model finds LTL savings
The initial
program has
yielded more
than 10%
savings in
transportation
costs.
TransportProjected
Mode
Percentage Saved
LTL with Kansas Cross Dock
LTL with Illinois Cross Dock
LTL with Kansas and Illinois Cross Dock
8%
8%
10%
In Nissin Foods’ model, routing LTL cargo through demand points in Kansas and Illinois resulted
in an almost 8% reduction in transportation cost, respectively, and more than 10% cost reduction
when combined. The optimized volume, when annualized, would result in significant annual
savings for just these two locations. Concentrations of demand density were then further modeled
for additional consolidation opportunities, ensuring that the distribution would yield positive results
prior to initiating any structural changes to the existing network.
Implementation and Results
Yusen Logistics’ operating divisions work hand-in-hand with its customers to ensure that the
Implementation of any supply chain solution strategy is a truly cooperative effort that delivers the
expected results.
For Nissin Foods, Yusen Logistics’ Transportation Group’s Specialized Services Division was
chosen to execute the consolidation and pool point distribution strategy developed by Yusen
Logistics’ Supply Chain Team. The optimization systems uses modular design to sequence
individual orders into optimized full truckloads and even multi-stop deliveries, capitalizing on
equipment availability and efficient route design.
The initial application of the program has yielded a 10% + savings in transportation costs. The
end result is an efficient, transparent partnership that focuses on developing and delivering
protracted results and ongoing competitive advantage for all stakeholders.
Yusen Logistics’ load building system
With Yusen Logistics’
load building software,
operators use a modular
system to combine LTL
shipments into optimized
truck loads.
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Continuous Improvement
Even when the solution is in place, Yusen Logistics’ work does not stop. The Kaizen culture of
continuous improvement means the company is never finished delivering results. Kaizen is rooted
in continuous improvement and is a supporting pillar of Six Sigma methodology. Continuous
improvement is recognized worldwide as a key component of an organization’s long-term
competitive strategy. Kaizen is a way of thinking, a culture and in the DNA of Yusen Logistics.
The modern supply chain is dynamic and ever changing. Supply chain performance should be
subjected to routine health checkups to ensure that optimal performance is being achieved in the
face of shifting demands and market trends.
Yusen Logistics (Americas) has a long history of service and dedication to its customers. As
a member of the NYK Group, the company draws upon more than 125 years of industry
experience. Yusen Logistics provides end-to-end supply chain capability across a range of
industry verticals that drive competitive advantage for today’s global marketplace. Let Yusen
Logistics Supply Chain Solutions team design a solution for you
—Michael Pedersen is Senior Analyst, Supply Chain Solutions, Yusen Logistics (Americas).
Work with Yusen Logistics’ Supply Chain Solutions Team
Yusen Logistics’ Supply Chain Solutions Teams develops and fosters strategic
business relationships with our customers. We apply our analytical tools and structured
methodology to uncover tangible value that will have a meaningful impact to our
customers’ supply chain strategy and competitive performance. For every client, we
follow these steps to ensure that your supply chain network challenges are met:
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About Yusen Logistics
Yusen Logistics is a global logistics and transportation provider that delivers custom supply chain
solutions through one of the largest air, ocean and land transportation networks.
We have over 478 offices in 40 countries, with more than 19,000 employees at your service.
Combining our services give you greater control and visibility over your supply chain.
For information about our Supply Chain Solution Services, e-mail [email protected] or visit our website at www.us.yusen-logistics.com.
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