Improving the milk supply chain

Do you think the milk supply chain has been optimized? Think again! Deliverying milk is an old business, but apparently there is still room for some kaizen. WalMart has redesign the milk jug to be made of cardboard and with a rectangular shape. Rectangular means they stack on top of each other, thereby eliminating the cost of milk crates, the cost to clean them, the space they occupy and the weight they contain. They claim that these features allow them to reduce the number of deliveries to each store per week – from 5 to 2 – but I don’t think they fully explain why nor do I think such a reduction is due entirely to this redesign.

Milk is a dense item, so I suspect trucks “weigh out” before they “cube out”, i.e., the amount of milk a truck can carry is constrained by the weight of the load rather than the volume of the load. Hence, saving on volume doesn’t allow you to transport more milk. Therefore, the extra capacity per truck must be from the reduced weight of not having to carry milk crates. But to reduce the number of trips per week from 5 to 2 requires a 5/2 = 250% increase in carrying capacity per truck, which doesn’t seem realistic. Note, this assumes total demand at the store is assumed to remain constant and trucks make dedicated deliveries to stores. It is the latter assumption that may be the source of the discrepancy. Suppose before the change each truck delivered to 5 stores and each store sold the equivalent of one truckload per week. Because each store receives 1/5 of a truck per delivery, it needs 5 deliveries. Now change the routing so that each truck delivers to only 2 stores per trip, but keep the truck capacity constant. Now the store needs only 2 deliveries per week. Hence, a reduction from 5 deliveries to 2 probably only could happen if they change their routing given that a 250% increase in capacity is unlikely. Although the new milk containers increase capacity per truck, and this reduces costs, it does not reduce the total number of needed deliveries by 40%. If we could figure out how to do that, then we would really save a lot of fuel.

NY Times 6/30/2008 – Solution, or Mess? A Milk Jug for a Green Earth

http://www.nytimes.com/2008/06/30/business/30milk.html?ref=business

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2 Responses to Improving the milk supply chain

  1. Gordon White says:

    One mouse click often leads to another fine blog. Like yours – Thanks.

  2. supply chain says:

    The analogy of “milk supply chain” is ingenious way to show difficult concept in easy way!

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