The encyclopedia · Engineering & Operations · Operational decision · 2013-2018
Danone's China water network saved 4.6% of costs with one DSS
One decision-support system plans production and distribution across 26 plants, 27 DCs and 2,000+ warehouses, cutting costs 4.6%.
Danone Waters China
the move
Danone Waters China produced about 500 million cases a year, roughly 45% of Danone China's income, from 26 factories through 27 distribution centres to more than 2,000 local warehouses. Growth of about 5% a year made spreadsheet-based production and distribution planning slow, inconsistent, and expensive.
The company developed a decision-support system whose mathematical models plan production and distribution together, incorporating all-unit quantity discounts, output-dependent production costs, and seasonal demand. Managers can adjust assumptions and re-run plans quickly.
In 2013, total cost came in at ¥665.626 million versus a budget of ¥698.305 million, a 4.6% reduction including 3.8% lower production cost and 6.2% lower transportation cost. The savings rate stayed above 3.5% in subsequent years, and planning decisions became far faster.
why it works
- One integrated model captured production and distribution trade-offs.
- It institutionalised a consistent planning process across the network.
- Fast scenario runs let managers react to demand changes.
- The savings were audited against an explicit budget baseline.
what transfers
When a network is too big for one person to see, a single integrated model beats siloed spreadsheet plans. The model's value is both the cost cut and the speed and consistency of decisions.
what came after
Danone kept the DSS in use and extended the approach to later years, with savings above 3.5% annually; the case was published in Interfaces in 2018.
references
- Production and Distribution Planning in Danone Waters China Division
- Production and Distribution Planning in Danone Waters China Division
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