IBM Case Study

US Dairy Industry Leader

Supply Chain Strategy and Network Optimization
Overview
With annual sales of more than

expertise and no common metrics or

network operations by standardizing

U.S.$44 billion, this Dairy Industry

analytical frameworks to drive

plant management, simplifying

Leader is one of the largest

improvement. Without a well-

product portfolios, designing a better

processors and distributors of milk

conceived and closely managed

network and manufacturing the right

and other dairy products in the

supply chain, the company could not

products in the right places. To help it

United States. The company sells

make informed competitive decisions

build a better network and locate

milk and a full range of other dairy

about production, plant and

plants and DCs, the company

products under more than 50 well-

distribution center (DC) placement,

selected IBM ILOG LogicNet Plus

known local and regional brands and

regions to serve and delivery options

XE. The network optimization

a wide array of private labels.

such as trucks and railways.

application has given the company a

detailed interface for viewing the

Business need:

Solution:

supply chain and its resources, a

The company looked at its supply

The company looked at its supply

powerful solving engine for

chain and saw that it could do things

chain and saw that it was spending

optimizing operations, and tools for

better. Historically, the company

approximately U.S.$11 billion on

analyzing the effects of key strategic

lacked a centralized supply chain

landed costs annually. To bring costs

decisions before, during and after

function. It had no direct authority

down, it targeted those for

their implementation. The company

over plants, limited supply-chain

procurement, production and

sees LogicNet Plus as an invaluable

tool in the companys effort to reduce
annual landed costs by more than
U.S.$300 million in the coming
years.
Benefits:

Reduced landed costs

Better plant positioning

Faster perishable goods

delivery

IBM ILOG LogicNet Plus XE provides detailed view of supply chain network

This Dairy Industry Leader is one of the

products in the right places. LogicNet

largest processors and distributors of

Plus was brought in to help it make well-

dairy products in the United States, and

informed decisions.

one of few operating on a truly national

scale. It has hundreds of suppliers, 105

The company was concerned that

plants and more than 300 distribution

the simple approachessentially

centers throughout the country.

common-sense assumptions based

on years of no centralized supply

Challenge

chainwould prevent the company

Key to the companys success is the

from spotting opportunities. LogicNet

delivery of its products at their freshest

Plus has enabled it to create models

for the lowest cost. Its product range

representing the different facets

includes fresh milk, yogurt, cheese,

of the companys operations, such

butter and ice cream sold under several

as procurement of raw materials,

recognizable household names. Most of

converting it into products and shipping

the companys products need to be kept

it to sellers regionally or nationwide.

refrigerated or frozen and have a shelf

This enables the company to see what

life of only a few weeks. It is crucial for

is working and what isnt. To help make

the company to operate an optimized

difficult decisions for optimizing the

supply chain that not only delivers fast

supply chain, the company can rely

but also keeps landed costs at their

on LogicNet Plus powerful solver

lowest.

engine, which uses IBM ILOG CPLEX,

the leading mathematical optimization

Solution

technology, to formulate solutions.

The company launched itself on

Furthermore, LogicNet Plus robust

a multiyear initiative to centralize

technology and easy-to-use interface

and streamline its supply chain. Its

allow it to perform what-if analyses

objectives included standardizing plant

by changing models to determine the

management, reducing the number

effects of different strategies.

of products it made, running a tighter

supply network, and making the right

We didnt want
to miss significant
opportunities or trap
organizations on the
wrong path for years.
IBM ILOG LogicNet
Plus enables us to
assess the impact of
different strategies
to run a competitive,
centralized supply
chain.
-- Vice President,
Supply Chain Strategy,
US Dairy Industry Leader

Products and services used

Software
IBM ILOG LogicNet Plus XE
IBM ILOG CPLEX

IBM ILOG LogicNet Plus optimization engine helps make hard decisions

Benefits
In real-life applications, the company

Found the best role for new

has experienced significant results

facilities within the supply chain

with LogicNet Plus:

network

Determined the best supply chain

among facilities

for driving lowest landed cost

(LLC)

Utilized low conversion costs

Reduced delivery area overlap

and delivery miles

Determined the right interaction

Identified LLC using partners in a

distribution plan

Assessed the value of acquisitions

Helped optimize existing business

Determined where assets should

while building an understanding of

be placed for a product launch

capabilities and costs

Indicated which market should be

served by which plant

Refined and advanced models

to further support the companys
supply chain

Developed a capacity deployment

strategy based on growth projections

 Copyright IBM Corporation 2009

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Produced in the United States of America
November 2009
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