In February 2010, Cadbury became part of Kraft Foods, making it the second-largest food company in the world. With approximately $50 billion in revenue, sales in 160 countries and a product stable full of iconic brands like Cadbury Dairy Milk, Cherry Ripe, Picnic and The Natural Confectionery Company, Kraft Foods is now number one in confectionery and number two in biscuits globally. However, the Cadbury Australia and New Zealand (ANZ) distribution network was facing a number of challenges. In particular, prompted by the need for greater efficiency, Cadbury decided common product across the regions would be produced by a single, dedicated manufacturing plant or Centre of Excellence (COE). Consequently, the flow of Cadbury products across ANZ, including imports and exports, was about to change significantly. Dane Smith, Kraft Foods ANZ Group Manager Customer Service and Logistics, says that strong,sustained growth left the network’s primary storage facilities unable to handle inventory and throughput levels. Finished products were held in nine different locations across ANZ, resulting in extensive handling and transport inefficiencies.
“Cadbury had multiple offsite storage facilities with six separate 3PLs [third party logistics providers] supplying warehousing services across ANZ,” Smith says. “The company also had four primary facilities, which were historically managed in-house.”
“In addition, a complex IT systems landscape was in place, using several different Warehouse Management Solutions (WMS). Each of these comprised different functional specifications and required extensive network interfacing.”
To address the challenges, Smith formed a team to design and implement an optimal integrated logistics network for Cadbury ANZ. “We require a network that will efficiently and
safely support our customer service agenda under the new Centre of Excellence’s manufacturing footprint,” Smith explains. “For us, the key to successful supply chain management is to deliver Cadbury’s finished products to our customers in full and on time, safely and at low cost. Enablers to achieve results include the right talent and capabilities, robust process and systems and a relentless focus on safety.” Smith commissioned Frans Verheij as Project Director and his team from Supply Chain Cover, a Melbourne-based supply chain consultancy, to plan and execute the new network strategy that would deliver the financial and operational benefits outlined in Cadbury’s business case. Tasks included the consolidation of nine storage locations across ANZ into four, the design and construction of two national distribution centres (NDCs) in Dandenong and Auckland with a total size of over 40,000 square metres and the implementation of a common SAP Warehouse Management Solution. Verheij, who has more than 17 years of global management experience in supply chain and manufacturing, says the key rationale for having two NDCs in Cadbury’s Australian network was the
ability to distinctly separate seasonal (mainly Easter) and non-seasonal supply chains. “The source of product, customer delivery points and the distribution models are different for the two supply chains,” Verheij says. “This allowed Cadbury to continue utilising its owned NDC on the manufacturing site in Ringwood, which suits the seasonal part of the business well in terms of size and delivery profile, as well as design a new NDC for non-seasonal products. “The decision to have national DCs rather than multiple regional facilities was mainly based on cost and proximity to volume flows from Cadbury’s ANZ manufacturing sites.” In NZ, Verheij says Cadbury did not own any DCs. “The sale of the company’s North Island
manufacturing plant allowed for a complete greenfield design of the New Zealand network,” he explains.
“Auckland was selected for the new facility because of its inbound port infrastructure and the majority of customers being located in the North Island.” Verheij describes the development process for both Auckland and Melbourne DCs as designing from the ‘inside out’, requiring the mapping of each DC’s internal operational flow prior to construction.Accordingly, phase one of project was to analyse key data in detail. Having defined both the current and long-term requirements to 2020, the appropriate levels of automation for the DCs were defined, including radio frequency, automatic storage and retrieval systems, automated guided vehicles and the use of SAP WMS functionality. The new Dandenong DC is designed with Cadbury’s 2020 storage requirements in mind. “Based on history and expected sales growth, the Dandenong DC should be able to hold 35,000 pallets
at any point in time,” Verheij says. Verheij adds that the facility is able to cope with different types and mixes of vehicles while the WMS and internal layout allow the picking of individual cartons, full pallet layers or full pallets. “Some specific customer requirements built into the design relate to shelf life rules, stock rotation rules, time slot rules and specific pallet configuration rules,” he says. “Throughput for the two new Melbourne-based NDCs combined is more than 2,500 pallets per day, where the previous network managed just over 1,400 pallets.” Most importantly, Verheij says providing a safe working environment for team members was top of the agenda for Cadbury. The Melbourne NDCs are designed with walkways next to exterior walls and separated by physical barriers on the outside of the building. The internal product flow is one-directional, with separate receiving and dispatch areas. “The sites offer 360-degree site access with separation of human, vehicle and product flows, the use of vehicle restraints (pit bulls) to prevent movement when loading or unloading, internal and external traffic lights and barriers where products could fall from height on areas in which team members operate,” Verheij says. “The NDCs also utilise cameras on forklifts, wide DC aisles and mirrors in areas with limited visibility. There is a continual focus on team member training in all aspects of safety,” he says. “Team members are trained and live the safety rules on site,” Verheij proudly adds. “When recently visiting the Dandenong site, I was reminded by one of the operators to stay in the designated walkways away from areas where material handling equipment operates.” The width, length, height and layout of the Melbourne NDC minimises internal traffic times and distances. Verheij says the dimensions were determined based on modelling which provided predictions of product flow through the NDC. “Racking has been segregated into four zones for fast, medium, slow and export products,” he says. “Fast-moving products are located in the heart of the building, close to the receiving and dispatch areas, where slow-moving product is stored further
away. “The new Melbourne facility meets high environmental standards equivalent to a 4.5-star sustainability rating. “Cadbury chose to build its Dandenong DC in the LOGIS Estate, Victoria’s first eco-industrial park,” Verheij points out. “Several sustainable features have been incorporated into the design, from the recycling of rain water, to the use of energy efficient lighting and cooling. “The facility also has high standard thermal insulation, local and indigenous landscaping, solar