With forecasts of a very hot summer, office workers around the UK will once again be relying on the office water cooler to keep them comfortable. The leading UK supplier of bottled water, Culligan International, has taken steps to improve their delivery service at a lower cost.
Culligan International, the world leader in bottled water technology, has reduced costs for delivering bottled water to offices, and significantly improved customer service by introducing Logix routing and scheduling software from DPS International – www.dps-int.com.
For over sixty-five years, US based Culligan International have been a world leader in water treatment technology supplying high quality water for drinking, cooking, cleaning, bathing and manufacturing
However, when it came to a need to reduce costs, improve service and grow market share, the company realised that one key competence was missing, that of logistics. The company's core skills were in the production of high quality water but there was also a need to get to grips with the cost and effectiveness of getting that water to UK customers.
Not surprisingly, the water business is highly seasonal and over an eight-week period in July and August volumes increase by an average of 50%. At peak times volumes increase by 64%.
Delivering bottled water of the type we are all used to in our offices, and sanitising (cleaning) the coolers themselves, represents around 40% of Culligan International's UK business. In addition, Culligan International delivers salt to both domestic and commercial customers for use in water softeners. One of the issues the company faced was that the delivery of these three services were not integrated and were treated quite differently in logistics terms, this they felt represented a terrific opportunity.
A range of vehicles, including car based and Transit type vans, 7.5 tonne trucks and 7.5 tonne flatbeds were being used for deliveries. Some of the sanitization was outsourced at a fixed cost for each call, and some dedicated sanitization engineers were directly employed.
Jon Wilkinson, appointed in 2005 as UK MD, quickly spotted this opportunity. His background in distribution with Parcelforce, DHL and Deutsche Post Global Mail UK, was the missing link for Culligan International.
Although Culligan International did not regard itself as a large fleet operator, at 54% capacity utilisation they obviously had either too many vehicles or the ones they had were too big. They were in fact operating a fleet of 40 x 7.5 tonne and 11 x transit type vehicles. All drivers were HGV qualified, including those who only drove transits, making recruitment retention and remuneration key challenges.
The business had to improve logistics efficiency by a significant margin. To achieve this Mr Wilkinson approached three distribution planning companies to help him with his project. "Only DPS using their Logix routing and scheduling software were able to accurately model the existing operations and costs of the business, the other two could not get close," Mr Wilkinson said. "DPS got within 2% of the current situation – a remarkable achievement."
"We also at the opportunities for integrating the three current logistics operations, water and salt deliveries along with the sanitisation activity and reducing or eliminating outsourcing" Paul Palmer, CEO of DPS said. This had to be achieved with minimal change to customer delivery cycles, whilst using the integration of sanitisation activities onto the delivery driver as a great opportunity to establish a new relationship with Customers.
In the pilot at their High Wycombe Depot, the study conducted by DPS, achieved all of the main objectives set by Culligan International. Out-sourcing was eliminated; water and salt delivery as well as sanitisation service calls were fully integrated. The flat bed vehicles were not required and the fleet balance was significantly changed in favour of vans away from 7.5 tonne trucks.
The cost of sanitisation visits fell by 60% - while the service level to customers was improved. Many low volume customers also agreed to receive visits on either a monthly or even quarterly basis. The workload was more evenly balanced between the drivers and Culligan's depots along with a reduction in overall management costs.
"The full year savings to us will be almost exactly the 15% DPS had forecast and the DPS study has brought us considerable improvements in service and in the job satisfaction of our drivers. We and they now regard them as primarily carrying out a customer service not just a delivery function," Mr Wilkinson told us. "We are now using DPS' Logix routing and scheduling software and we have reached utilisation rates as high as 92% for our fleet up from 54% – we now only hire in capacity to meet absolute peak demand".
"Most importantly we now know what our deliveries are costing us by size, segment, area, route, and so on. The cost for each bottle delivered has fallen by 15% and we have much happier customers. As an added benefit to the staff and customers, we are now employing more people because we have eliminated the outsourced operation".
Of the consulting work done by DPS and subsequently the purchase of the software, Mr Wilkinson commented, "The approach was a thoroughly professional, no-nonsense one which is exactly what we were looking for. The analysis was delivered on time and produced a very plausible and practical set of recommendations, which were fully implemented within a matter of weeks."