Case Tuko: Managing a complex DC replenishment operation

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Introduction

Finnish grocery wholesaler and supply chain service provider Tuko Logistics runs a massive operation processing around 45.5 million order rows per year ranging from fresh food to more ambient products. The high volumes, short delivery times and shelf lives of the fresh food items, demanding service levels and high product quality, are a challenge for the replenishment team. To increase automation, Tuko has been using RELEX since 2012.

Tuko deals with some 1,600 suppliers, and receives 325 truckloads per day into a busy DC run by a staff of 600, 7 days a week. Tuko supplies some 25,000 SKUs to nine major retail chains, comprising some 1,000 stores and additionally to around 5,000 enterprise customers (HoReCa + wholesale).

Tuko Logistics at a Glance

  • Serves 1,000 outlets and approx. 4,500 foodservice, hotel, restaurant and catering clients
  • Employees 600
  • Delivers approx. 25,000 products from 1,600 suppliers

www.tuko.fi

“RELEX has delivered measurable value. It’s easy to demonstrate its contribution to the bottom line; ours, our suppliers’ and our customers’.”

– Tuomas Brunou, Planning Manager, Tuko Logistics Cooperative

Challenges

Overall the company processes around 45.5 million order rows per year ranging from fresh food to more ambient products. The high volumes, short delivery times and shelf lives of the fresh food items, demanding service levels and high product quality, are a challenge for the replenishment team.

“Our challenge was to manage upstream and downstream simultaneously,” says Tuomas Brunou, Planning Manager at Tuko Logistics Cooperative. “Our suppliers were guessing or forecasting our needs and our customers’ needs without proper data. By integrating the whole supply chain and sharing data each way it helps everyone plan better and sell more.”

Tuko needed a system that allowed it to:

  • Plan its capacity and workforce
  • Handle the purchasing process and optimize purchasing costs
  • Optimize inventory and stock values

RELEX offered that and greater scope for automation, more optimization of the replenishment process, reduced working capital, process flexibility, multi-level supply chain integration and, critically batch-level monitoring of spoilage, key to improving freshness throughout the chain. Data could also be shared more easily with suppliers – a key objective.

“Our suppliers were guessing or forecasting our needs and our customers’ needs without proper data. By integrating the whole supply chain and sharing data each way it helps everyone plan better and sell more.”

Tuomas Brunou

Planning Manager, Tuko Logistics Cooperative

The project

In 2012 Tuko Logistics decided to implement the RELEX system to increase automation of its own central warehouse replenishment. Previously inventory levels, sell-by dates and other replenishment information were held in separate systems; combining and analyzing this data manually was time consuming.
“We wanted to integrate and synchronize our daily operations tightly with our customers’ business processes,” says Tuomas Brunou. “We needed our central warehouse replenishment to reflect customer-specific forecasts that factored in their promotions and activities.”

RELEX’s solution uses over 3,000 forecast model combinations and numerous parameters including historic sales patterns, seasonal effects, supply days, minimum order quantities, freight-free limits etc.

In early 2014, Tuko extended its collaboration with customers Wihuri, Stockmann and Suomen Lähikauppa; all three are also shareholders in Tuko and use RELEX systems. Forecasts calculated by these individual customer chain systems are now fed directly into a central RELEX system. There they are combined with historical sales data, which allows highly reliable forecasts to be provided.

The resulting store-level order forecasts are fed into Tuko’s central warehouse as delivery plans. Combined with other central location information, these then form the basis of Tuko’s own purchases and are used to enhance collaboration with suppliers. “Tuko Logistics is a forerunner in fully integrating supply chain management from supplier to POS,” says RELEX COO Tuomo Pesonen.

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Spoilage cut

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decrease in inventory

Results

Purchase order automation levels were pushed to between 80% and 90% while availability stayed at over 99%, and spoilage was cut by around 40%.

Inventory has fallen 8–10% (capital cut 3.1%), while forecast accuracy has improved 2–3 weeks. Peak-time picking and goods-in capacity has been optimized.

The planning team has slimmed down by 50% (from over 20 to under 10 with RELEX) through natural turnover.

Some suppliers now contribute to costs in exchange for access to forecasts because they’re so accurate it helps them plan and save money.

“RELEX has delivered measurable value,” says Tuomas Brunou, Planning Manager with Tuko. “It’s easy to demonstrate its contribution to the bottom line; ours, our suppliers’ and our customers’. It has paid for itself many times over. It’s that simple.”

Warehouse

Results

  • Purchase order automation levels between 80% and 90%
  • Product availability over 99%
  • Spoilage was cut by around 40%
  • Inventory has fallen 8–10%, while forecast accuracy has improved 2–3 weeks

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