Case Study

CHEP Leverages Modeling Technology for Continuous Supply Chain Improvement

“In the past it may have taken months to get the information we needed from spreadsheets. As a result, many decisions were made based on gut feelings. Now we get quantitative answers in as little as a few days.”

– Stephen Wetter, Senior Manager, Global Network Planning, CHEP
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CHEP Leverages Modeling Technology for Continuous Supply Chain Improvement

Leveraging LLamasoft supply chain design capabilities for both tactical and longer-term decision support has helped CHEP, a worldwide leader in pooling solutions, to build a more agile, efficient supply chain to better serve customers while simultaneously exploring collaboration opportunities.
Since its first supply chain network optimization project several years ago, CHEP, a long-time LLamasoft customer, has progressed from intermittent network optimization projects to making supply chain design an internal core competency and a continuous process to support strategic and tactical decision making. This evolution is due to the deeper understanding of best practice model design and the maturation of the organization in “design thinking”. Maintaining living models is seen as the best and fastest way to answer supply chain ‘what-if’ questions and build a thriving supply chain network.

For continuous improvement of its North American operations, CHEP maintains a single living model of its U.S. and Canadian supply chains. The model closely represents the current supply chain network, but has a forward-looking perspective of six to 12 months into the future leveraging demand forecasts, supply forecasts and S&OP models. Integrating these forecasts with in-progress supply chain changes combined with known operational realities in the model enables analysts to confidently answer both near-term and strategic business questions. Below is a glimpse into how CHEP uses the LLamasoft design platform:

Collaboration Opportunities

With today’s supply chains becoming more competitive and complex, it’s important for suppliers to differentiate in order to maintain strong customer relationships and earn new business. CHEP is able to leverage modeling as a competitive differentiator with many customers in both the retail and manufacturing industries that are looking for opportunities to expand their partnership for mutual benefits. In this way, modeling technology is being used not just as an internal planning tool, but a way for the company to offer more value-add options to customers.

Real Estate

With approximately 125 service centers in North America and many on five to 10 year leases, real estate decision making is continuous and good decisions are imperative. When new space becomes available for expansion or leases near maturity, CHEP uses the supply chain model as a quick and easy way to analyze the information and decide if an opportunity is worth pursuing, and if so, what type of facility, capacity, footprint, etc. is required. Because the model contains forward-looking data, it is ideal for supporting these more tactical, short-term decisions required to develop business cases for facility changes.

With such a large and interconnecting network covering most of the USA, modeling these decisions can also assist with avoiding any unintended consequences that cannot be understood through traditional single-sheet financial models.

Business Case Development

As with many organizations, there are often more ideas for change than resources available to implement. By leveraging the maintained North American supply chain model, CHEP can quickly run scenarios to determine the approximate value of each idea, and separate those ideas into the categories of “Do Now”, “Do Later” and “Never Mind”. For the “Do Now” ideas, the model output then becomes the starting point for the business case development with additional factors layered in as needed.

Occasional “Big Bang” Projects are Important Part of Supply Chain Management

While maturation of the organization in LLamasoft technology and modeling methodology has led to new, more tactical use cases, the longer-term projects still have an important place. The business still asks the big questions on supply chain alignment with organizational goals five years down the road. “The ‘big bang’ projects that require more time, wider scope and a more forward-looking perspective are still required,” said John Morrison, Vice President Global Strategic Network Planning for CHEP. “The difference is, with a continually-refreshed supply chain model, we don’t need to do the big bang projects as often as we used to, they’re much easier to run, and the output is much easier to execute against.”

Tactical Modeling Still Requires Discipline

While their modeling use cases have changed, the CHEP team still follows the same proven modeling process and methodology, beginning with careful scoping and charter development, data gathering, validating the baseline, scenario analysis, implementation of recommendations and follow-up to measure success. This full-circle method ensures that, while the models are regularly refreshed, the input data and output remain clean, precise and complete.

“The more immediate the outlook, the more complicated the model can be,” said Stephen Wetter, Senior Manager of Supply Chain Optimization and Design for CHEP. “With near-term reality, there are more constraints, more real-life detail. At any given time, we may have 50 to 60 projects running, and the model helps us understand the interactions between the various yet-to-be-implemented projects.”

A Success Story Still Being Written

Driving business strategy based on model results has led to significant improvement in overall supply chain costs and faster time-to-answer for critical supply chain questions. “In the past it may have taken months to get the information we needed from spreadsheets. As a result, many decisions were made based on gut feelings. Now we get quantitative answers in as little as a few days,” said Wetter.

In businesses like CHEP’s that have a return profile, there can be big ripple effects to decisions. One change to the supply chain can have numerous unintended consequences. “Previously with spreadsheets we would often miss those ripple effects or we’d be forced to be too conservative in our decisions,” said Morrison. “LLamasoft give us visibility into those effects that could occur, so we can challenge our internal belief systems and make better longer-term decisions.”

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