New System Producing More Efficient Supply Chain

From his laptop computer, Felix Santana, Cummins’ Global Logistics Leader, can easily monitor the nearly 500 trucks that deliver material to company facilities in North America on a typical work day, checking on their contents, location and other information.

When he joined Cummins three years ago, that was nearly impossible to do. Each of the company’s four business units ran its own transportation systems, with different service providers.

“While a lot of our facilities were relatively close together and provided material to each other, we were working in isolation,” Santana said. “When we found out that about 85 percent of our total weight was being shipped within 10 states, we knew we had an opportunity for significant savings by synchronizing our logistics strategy across the different business units and working as a single entity.”

Today, Cummins is using a new transportation management system for North America that includes three of the company’s four business units – integration is underway on the fourth. The savings have been significant, about $2 million and 2,400 metric tons of carbon dioxide (CO2), a key contributor to global warming.

That is just the beginning. As part of Cummins’ overall efforts to improve fuel efficiency and reduce its carbon footprint, the company has set a logistics goal of using the most efficient method and mode to transport goods across the company’s network.

The goal calls for reducing CO2 per kilogram of goods moved by 10 percent by 2020. Santana figures when final numbers are in Cummins will end 2015 with around a 2.3 percent reduction, putting the company on track to reach its 2020 goal.

Transportation for the Engine Business Unit, the Power Generation Business Unit and the Components Business Unit is now managed using a system operated by TMC, a division of C.H. Robinson, a leader in the logistics industry.

In addition to tracking the deliveries, TMC looks for efficiencies such as combining shipments for more than one business unit. At first, Santana said this made some business units nervous that critical parts would not be delivered on time. But TMC has demonstrated it can find efficiencies without sacrificing performance. In many instances, it has been able to coordinate deliveries so plants have to manage less inventory on site – another key savings.

The collaborative efforts of the logistics team extend beyond the enterprise.  It has also benefitted the private transportation providers Cummins depends on. For example, trucks bringing material from Columbus, Indiana, to the Cummins’ engine plant in Jamestown, New York, can now coordinate their trips to pick up other material such as juice from another client rather than return home empty.

Other supply chain improvements, such as Cummins’ new Southern Indiana Logistics Center, a 428,000 square foot state-of-the-art regional warehouse located next to the Cummins MidRange Engine Plant in Walesboro, Indiana, have also contributed to greater efficiencies in North American logistics.

Santana said many other improvements are in the works including the introduction of new cross-docks in the U.S. that can directly move product from one truck to another, skipping any need for on-site storage; improved packaging for better truck density and waste reduction; fuel efficient truck fleets and the use of telematics to better track and coordinate shipments.

After integration of the Distribution Business Unit in North America into the transportation management system is complete, Santana said his team plans to complete integration of Europe and then Mexico in 2016 and South America in 2017. One of TMC’s strengths is its global footprint and the logistics team is looking to add China in 2018.

“I’m confident that by the time we reach 2020 and all of these steps are complete we will reach our goal,” Santana said. “But I’m really excited to see what other opportunities this technology might lead to.  We have the potential to make some really significant improvements as we continue to be laser focused on supply chain excellence as one of our key growth accelerators. “