TNT Express, now part of Fedex, faced the challenge of efficiently managing a vast supply chain network that spans 200 countries, involving 5 million weekly shipments through a fleet of 40 aircraft and numerous trucks and delivery vans. Navigating the complexities of a diverse logistics chain becomes even more critical due to the volatile nature of demand and constant changes in customer supply chains.
The Board of TNT emphasizes reducing unit costs while maintaining transparency regarding strategic decisions such as acquisitions and divestments. In 2008, during the financial crisis, TNT encountered a sharp decline in freight volume, prompting a crucial decision-making scenario: balancing cost-cutting measures against potential customer and revenue losses.
To enhance decision-making speed and quality, TNT asked us to support them with the development and application of decision support models. The objective was to streamline decision-making processes and increase transparency for shareholders and customers. The challenge lay in avoiding oversimplification, as the intricacies of the logistics chain required meticulous attention to details, such as precise scheduling to prevent delays and optimizing network structures for different product lines.
During the financial crisis, we developed the DELTA model, a sophisticated mathematical representation of the supply chain at a minute-by-minute level. This model allowed the Board to explore various future scenarios, weighing cost savings against potential customer and revenue impacts. The DELTA model proved instrumental in swiftly implementing the chosen plan, resulting in a €20 million cost reduction and only a 5% decrease in revenue.
The introduction of decision support models transformed TNT’s decision-making approach from intuitive and reactive to fact-based and anticipatory. Over four years, TNT achieved significant cost savings, totalling over €200 million, leading to a substantial improvement in unit costs. This transformation enabled TNT to make better trade-offs between costs and agility, reinforcing customer-centricity and enhancing resilience to market volatility and oil price fluctuations.
Notably, the decision support models contributed to a substantial reduction in CO2 emissions. By optimizing air and ground vehicle movements, TNT saved 283 million tons of CO2, equivalent to circumnavigating the globe 7,000 times in a truck. This commitment to sustainability aligns with global efforts to address climate change.
The implementation of decision support models at TNT Express not only resulted in significant cost savings and improved operational efficiency but also demonstrated a commitment to sustainability and global humanitarian efforts. The journey from crisis management to proactive decision-making showcases the transformative power of data-driven insights in the logistics industry.