When you turn to an outside provider to reorganize your supply chain, it helps to have a partner that is not only knowledgeable about your business but flexible enough to keep changing the model until it gets it right, says Thomas Friend, vice president of supply chain for Fonterra North America, and John Kelly, vice president of business development at Jacobson Companies.

Fonterra is a New Zealand dairy coop comprising 11,000 dairy farmers. When its North American subsidiary needed to revamp its supply chain, it turned to its transportation management provider, Jacobson Companies. Extensive network modeling encompassed operations in New Zealand, domestic sourcing in North America, all of its plants across the U.S., its deployment networks and final customer deliveries.

"We did this model over three or four months, and in the process we discovered that they should close a series of locations and open one centralized DC in Chicago," Kelly says. "We helped them locate near Chicago, in Sherwood, Ill., which was chosen based on its proximity to railheads to the East Coast and West Coast. We started that location up and run it today."

Friend says 80 percent of Fonterra North America's product comes in containers from New Zealand. That meant that in any refashioning of its supply chain, it had to balance the needs of the mother company with those of the local market.  Perhaps most important, he says, the executives at the U.S. subsidiary "learned that you need to have a partner willing to listen and work with you in relationship to what your needs are, what your strategic goals are. It's easy to use modeling tools and look at the original outcome and say this is the answer, but in the end, we found that wasn't the ultimate answer because it didn't deal with our strategic needs. Once they were applied to the model, we came out with a solution good for Fonterra and for our customers also."

In addition to running the Illinois DC, Jacobson Companies brought in a Six Sigma team to help improve operations. It has also restarted the network model to encompass the company's cold chain operations across the U.S. and the world.

Interestingly, the North American subsidiary is exporting large amounts of product back to New Zealand for use in the manufacturing process there. "That was not in the mix when John and I first started the project in Sherwood," Friend says.

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