Since 1980, Anheuser-Busch, the world's largest brewer, has increased the number of brands produced from 5 to over 50. This rapid growth has greatly increased supply chain complexity, with over 1000 brand-package combinations distributed to over 600 wholesaler locations in the U.S. alone. In 1994, Anheuser-Busch established a multi-disciplinary Production and Logistics team, charged with re-engineering the supply chain to better cope with the challenges of complexity. The team quickly recognized that Anheuser-Busch was involved in two logistically distinct businesses - established high-volume products and low-volume "growth" products, with the latter accounting for over 80% of brand/package combinations and only 10% of total volume. Growth products represent important market opportunities and must be managed effectively, but have greater demand variability than the established products, require greater flexibility, and impose more costs and complexity throughout the supply chain.

After considerable investigation, the team recommended a series of strategic initiatives, beginning with re-engineering of production and inventory deployment, proceeding to transportation, and culminating in order fulfillment. The growth products were assigned to fewer plants with shorter production cycles, and their inventory was predominantly deployed across 35 wholesaler support centers throughout the U.S. The resulting improvements have been dramatic:

• 90% of low-volume items are now within 200 miles of their destination, compared to 25% previously.
• Costs of purchasing, operations, and transportation are minimized without loss of customer service.
• Anheuser-Busch is well positioned for future expansion in its growth segment.

An important element of the re-engineering effort was an initiative called "Transportation Advantage," which involved review and re-configuration of the transportation processes for both long-haul and short-haul delivery of beer to wholesalers. The objective was to lower costs and improve service by leveraging the buying power for all brewery inbound and outbound transportation, including truck and rail, through one customer - Anheuser-Busch. This provides a flexible transportation infrastructure that can be used to increase capacity utilization and acquire backhaul revenue. The results to date have been impressive:

In Brewery Operations:

• Partial pallets into support center territories have
  been reduced 56%.
• Interplant shipments have been reduced 78%.
• Items per brewery load have been reduced 41%.
• Transportation costs have been reduced 15%.

In Wholesaler and Support Center Operations:

• Wholesale support center costs are 7% below
  expectations.
• Transportation service is 99% on-time or early.
• Wholesaler Out-of-Stocks have decreased 30%.

Anheuser-Busch involved its wholesalers in development of the strategy, and part of the transportation cost savings is shared with the wholesalers, who had previously managed most short-haul operations.

The Role of EHS
Anheuser Busch has continuously demonstrated a strong commitment to environmental protection, frequently going beyond compliance and demonstrating that profitability and environmental excellence can go hand-in-hand. As the supply chain re-engineering efforts evolved, corporate EHS personnel have identified a number of areas in which increased supply chain efficiency has also yielded environmental performance improvements. For example:

• Taking a strategic view of transportation resources has enabled Anheuser-Busch to reduce transportation costs by maximizing the utilization of available distribution vehicles. Wherever possible, the company identifies opportunities to backhaul packaging materials or expired products in empty trucks previously used for delivering beer to wholesalers, thereby reducing the number of empty trucks on the road. In some cases, lighter weight vehicles have been adopted for short-haul deliveries. These types of actions not only increase fleet productivity, but also reduce the consumption of fuel and the associated emissions of greenhouse gases.
• In 2000, the company began a program to help wholesalers recycle the stretch film used to secure pallets of Anheuser-Busch beer during transportation. Anheuser-Busch Recycling Corporation coordinates pickup of recovered film from the 18 participating distribution sites on empty beer trucks, and delivers bales to film recyclers. Anheuser-Busch has worked with the distribution centers to help finance the cost of balers. The program has now expanded to more than 250 wholesalers.

The EHS group at Anheuser-Busch is working to establish appropriate performance metrics and data management systems to account for the EHS performance benefits of the dramatic improvements in supply chain efficiency described above. The ability to report these benefits will only strengthen the company's reputation as a leader in responsible business practices.

Source: C. Gregory John and Michael Willis, "Supply Chain Re-engineering at Anheuser-Busch," Supply Chain Management Review, Fall 1998, pp. 29-35.