Black & Decker HHI Puts CPFR to Action

When your biggest customer comes calling with a new requirement, you must race to comply no matter your size or situation in order to maintain the much-coveted collaborative retail relationship. Wal-Mart's RFID mandate was the quintessential example of the power that big box retailers have, but smaller retail requirements and mandates that extend throughout the supply chain, from lead times to fill rates to quality assurance and product labeling, can often also dramatically impact the ways in which manufacturers operate.

To better support its existing alliances with two superstore retailers -- Home Depot and Lowe's -- supply chain leaders at Black & Decker Hardware and Home Improvement (HHI) recently sought one synchronized view of demand throughout its supply chain. Upon project completion, a reformed collaborative planning, forecasting and replenishment (CPFR) strategy backed by enabling technologies and an aligned business/information systems (IS) team allowed the manufacturer to realize benefits beyond improved collaboration at retail.


A Fixer Upper

Black & Decker HHI is one of three divisions under Black & Decker, the global manufacturer and marketer of quality power tools and accessories, hardware and home improvement products as well as technology-based fastening systems. Black & Decker HHI manufactures and markets architecturally-inspired building products for the residential and commercial markets. Its product mix includes security hardware products under the Kwikset, Baldwin and Weiser names, as well as other trademarks and trade names; and plumbing products under the Price Pfister name and other trademarks and trade names. Headquartered in Lake Forest, Calif., this segment accounted for sales of nearly $1 billion in 2008.

With manufacturing and distribution facilities in the United States, Canada, Mexico and a recent expansion in Asia, Black & Decker HHI is challenged to manage both off shore and domestic supply chains where various products with complex product structures are produced. The complexities are compounded by the demands imparted by Black & Decker HHI's distribution model: "Two of our superstore retailers have high fill rate expectations --  greater than 98 percent -- and on-time delivery requirements. At the same time, homebuilders require made-to-order configured products within 14 days," explains Scott Strickland, vice president of information systems, Black & Decker HHI. "Both of these customer group requirements must be balanced against internal inventory investments."

With a large amount of its sales tied to big-box corporations, Black & Decker HHI had dedicated demand forecasting teams in place working exclusively with personnel employed by Home Depot and Lowe's. These planners actually worked in the same cities where their clients were headquartered to enable close cooperation in efforts to maintain supply levels on par with consumer demand.    

However, with no central planning software in use, CPFR was a labor-intensive process; planners juggled massive amounts of product data downloaded in spreadsheets from retailers and eyeballed historical sales, projecting demand based on judgment analysis of trending and seasonality. Further compounding matters was a third set of planners who managed demand for the thousands of other distributors, retailers and builders making up the remainder of sales.

"In addition, the previous process and solution prevented us from analyzing the impact of a significant demand change in our manufacturing and distribution plan," says Strickland. As a result, the company was experiencing manufacturing overtime, expedited shipments and flat inventory levels.


Solution Toolkit

In order to obtain full visibility of its supply chain, Black & Decker HHI developed essentially three software implementations, each customized to meet the requirements of the various planning groups yet all with a unified business purpose. Leveraging the process, system and change management expertise from Plan4Demand, Black & Decker HHI embarked on a three-phased approach that targeted its worst pain point first: Supply chain planning.

After holding a functionality and software review, the company chose to implement JDA Demand from JDA Software Group, starting with its manufacturing facilities in Mexico in 2006. The technology was rolled out to its Asian and U.S. facilities shortly thereafter.

The solution was configured to incorporate point-of-sale (POS) data from Home Depot and Lowe's, allowing one single process for its frequent line reviews, product promotions and introductions as well as frequent price changes. The solution also helps determine the appropriate product mix and gauges the effectiveness of various promotions.

"We can compare forecasts, shipment history as well as POS and order history for any of our SKUs at any given time," says Strickland. "At the end of 2007, this resulted in a 10.4 percent improvement in forecast accuracy."

Next, Black & Decker HHI turned its attention to improving the demand signal by addressing the forecasting process. Implementing JDA Master Planning at the plant level helped to establish operational efficiency, create supply flexibility and achieve fill rate commitments to customers.

Soon after, JDA Fulfillment was added into the technology mix to completely synchronize supply and demand. This tool leverages forecast and end-consumer demand signals to create an optimized, multi-level replenishment plan down to the store level.

Acting as a partner at the steering committee level all the way down to the plant floor, Plan4Demand helped Black & Decker HHI ensure that all three planning groups could create forecasts at their preferred level of detail as well as at a higher level of detail based on common metrics and universal key performance indicators.


Unlocking the Benefits

With now full visibility into its supply chain operations, Black & Decker HHI has built truly collaborative relationships with its retail customers. But the benefits extend inside the organization as well. With process improvements, including transformed sales & operations planning as well as the realignment of the supply chain organization along category lines, Black & Decker HHI has realized the following:

• 60 percent reduction in forecast creation cycle time
• 50 percent reduction in supply plan creation time
• 80 percent reduction in monthly production cycles

These results, in addition to a 10.4 percent improvement in forecast accuracy, have prepared Black & Decker HHI to support future retail relationships. "We would like to continue to lead the way in forecast collaboration with our superstore retailers and start collaboration with other retailers and co-op stores," closes Strickland.