How OR improves pallet loading efficiency

How OR helped a leading drinks business become more efficient in packaging and warehousing to improve profitability.

Two bottles of Guiness Extra Stout

The Problem

Diageo, a leading premium drinks business, is the thirteenth largest publicly quoted company in the UK. Currently it trades in 180 markets worldwide. The very competitive premium drinks market is currently going through a period of consolidation and realignment. Increased competition and unanticipated activity by many competitors have been putting pressure on prices.

Most of the Diageo’s Guinness products sold in the UK come from production facilities in Ireland, with the 'bulk' products being conditioned and packaged in bottles and cans in a major plant in Runcorn, Cheshire. This acts as the supply centre for UK, Ireland and numerous international markets.

Pack designs resulting in wasted warehouse storage or failing to make maximum use of delivery vehicle space will result in higher costs, additional vehicle journeys, and negative environmental impact. So, in order to remain competitive in these markets, consideration has to be given to the design of the bottles and cans, packaging, efficiency of supply line transport, minimisation of product damage and potential environmental impacts.

Diageo’s Runcorn plant deals with more than 100 main product formats and over 15 million cases of product per year. The scale of the operation means that failure to package just a single product line in the most efficient manner could easily result in losses of £100,000 - or far more.

The OR Solution

OR techniques are ideally suited to making sense of such problems, and Diageo consulted Gower Optimal Algorithms Ltd (GOAL) about possible solutions. This company has a software product PALLETMANAGER which utilised OR techniques to gain efficiencies.

GOAL believed that PALLETMANAGER would solve Diageo’s packaging, storage and transport problems. Their recommended tool was constructed to a modular principle, each module of which could be applied to specific problems. Then Diageo used PALLETMANAGER to design the optimum product sizing and packaging dimensions, and to produce appropriate formats for loading their products on distribution pallets.

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The Value

Efficient packaging, warehousing and transport resulted in considerable cost benefits for Diageo. As a responsible business Diageo are keen to ensure the quality and integrity of their products for their customers, and want to ensure their product arrive undamaged, whilst maximising load efficiency. PALLETMANAGER provided the solution to these aims and also helped to minimise environmental impact.

Small to medium sized enterprises (SMEs) can benefit from OR enabled applications too - Mookie Toys for example, produce a wide range of activity toys for the UK and the International market place. They applied PALLETMANAGER to problems encountered with their Swingball product line. The result of this application was an annual saving of around £25,000.

The next time you see a bottle or can of Guinness on your local supermarket shelves, take a moment to appreciate the efforts of operational research in sizing the product, getting it to you in the best possible condition and doing this with the minimum of environmental impact.