Reckitt Benckiser Goes Back to the Drawing Board

Although Reckitt Benckiser Group may not be a household name, its products, including Lysol, Woolite, French's mustard, Electrosol dishwasher detergent, Mucinex and, for teenagers, Clearasil acne medicine, are certainly well known.

Like many industries, the consumer goods (CG) sector is challenged by the current difficult business environment -- volatile fuel prices and demanding customer requirements. Reckitt Benckiser embraced this challenge when it outsourced North American transportation to third-party logistics provider (3PL) Ryder.


Starting from Scratch

Reckitt Benckiser is no stranger to logistics outsourcing. The company had outsourced its transportation management to two consecutive 3PLs. However, these providers lacked the capabilities needed to support its growth going forward in two important areas: Reckitt Benckiser wanted a supply chain partner with sufficiently robust information systems to not only manage its entire transportation activity portfolio, but to provide real-time visibility into the movement of product and orders throughout the company's U.S. supply chain. The company also wanted a 3PL partner with transportation procurement clout, so it could leverage greater volume to lower costs.

In outsourcing its transportation operations, Reckitt Benckiser viewed the change as an opportunity to start over -- and rethink the company's transportation strategy and execution.

"One of the first things we did was go back to the drawing board on our carrier and modal mix," explains Joe Rosiek, manager of North American transportation operations, Reckitt Benckiser. "We issued an all-out request for quotes for the range of transportation services we needed across the United States."

Reckitt Benckiser also tapped Ryder for distribution network studies, which helped to define where the company's operations should be located. Rosiek adds, "These studies have helped us understand where our volumes are made, bought and sold. Based on that information, we assess whether we are actually shipping from the right places."

Ryder manages more than $100 million in transportation spend for the CG company. The 3PL orchestrates the movement of raw materials into seven manufacturing plants, and manages the transportation of finished goods from these plants to Reckitt Benckiser's five logistics centers, and then on to customers.


Bottom Line Savings

Within two years, the collaboration produced a significant amount in savings for the company. But more importantly, and for the long term, Reckitt Benckiser has significantly improved its service to customers, some of which are the most exacting in the business. In fact, Reckitt Benckiser's on-time delivery performance has jumped from 88 percent to 98 percent since outsourcing its transportation management to Ryder.

This is a critical customer service improvement that not only means more satisfied customers, but also considerable savings for Reckitt Benckiser in the form of significantly improved vendor compliance performance. Virtually every major U.S. retailer contractually requires vendors such as Reckitt Benckiser to meet stringent service requirements for such parameters as on-time delivery and order accuracy, and assesses fees  or chargebacks if they fail to do so. Reckitt Benckiser's improved delivery performance translates into fewer fees with the savings going straight to the company's bottom line.


Beyond Cost Management

One of the most valuable assets to come out of its two-year relationship with Ryder is the detailed database that the manufacturer now has on all of its U.S. transportation activities. Ryder regularly mines this information to identify opportunities for savings, efficiencies and operational improvements, particularly in areas that can enhance customer service.

Thanks to this extensive database, for instance, Reckitt Benckiser has gained a much more accurate picture of its actual transportation spend for its divisions. In the past, the manufacturer simply allocated transportation costs by percentage to its household and food divisions (70 percent and 30 percent respectively). These allocations were not based on actual cost data, thereby incorrectly skewing transportation budgets for the two divisions. "The household products division was making its budget, but the food division was taking a beating," observes Rosiek.

Ryder also uses Reckitt Benckiser's transportation data to manage activities on a more holistic, network-wide basis. Using the more comprehensive information on Reckitt Benckiser's transportation activities, Ryder conducted a network design analysis.

"They took all of their orders and ran them through their network optimization tool," notes Rosiek. "The tool showed us how we could reduce transportation costs in certain areas by changing which logistics center we serviced them from."

Reckitt Benckiser has begun to use the analytical tools and capabilities in other ways as well -- in decisions regarding taking on a new supplier or co-packer, for example. "They analyze supplier locations and tell us, 'If you buy from Supplier A, your transportation spend will be X; if you buy from Supplier B, your transportation spend will be Y,'" Rosiek elaborates.

Management can then make sourcing decisions based on total delivered cost as opposed to purchase price alone. This enables the company to execute a better overall procurement program.

"With the company growing at 10 percent a year, we are focused on satisfying the customer over the long term," Rosiek emphasizes. "We're not just focusing on what it costs to get product delivered to them today."

"Ryder helps us keep our transportation costs in line, no question," the distribution manager acknowledges, but adds, "They have gone further than that and helped us significantly improve service to our customers.

When Rosiek joined the company, service performance to Wal-Mart and other customers was in the high 80 percent range for "required-to-delivery date" and in the low 90 percents for "on-time-to-delivery appointment."

"Today, our service is better than 98 percent on time to these companies. So our service has moved up seven to 10 points.

"Keeping our customers satisfied by providing the high service levels they want and need, that is the heart of our business," Rosiek concludes.