Campbell Soup Cuts Forecast Error In Half

At 135-years-old, the Campbell Soup Company brings in nearly $7 billion in annual sales and touts more than 20 market-leading brands from a diverse product portfolio, which includes everything from the familiar red and white cans to Pepperidge Farm bakery to Godiva chocolate. Campbell's North American Soup, Sauces and Beverage division generates around $3 billion in annual sales and manages around 4,500 SKUs, a number recently boosted by the company's desire to appeal to the convenience market.

This year, Consumer Goods recognizes the Campbell Soup Company, specifically its North America operations, for its outstanding effort supporting a booming business with a demand plan centered on improved forecast accuracy.

Vision for Change
Since joining the company three years ago, Campbell's VP North America Planning & Operations Support, Mike Mastroianni, has spearheaded a sales and operations planning (S&OP) initiative to deal with supply chain issues such as the volatility of forecasting errors and the impact it has on production and transportation cycles. While the company recognizes that forecast error will always exist, it strives to improve its ability to execute base forecast and react to sudden and unexpected surges in demand.

"Historical data is becoming less and less relevant as we look forward with our demand plans," says Mastroianni. "We need to find ways to take real-time data and embed it into our processes and technology to drive that future demand plan."

For Campbell, internal benefits of improved forecast accuracy could include improved employee engagement driven by improved tools; better manufacturing efficiency and less obsolete product; and increased merchandising opportunities by way of better customer relationships. In addition to internal paybacks, improved forecast accuracy offers Campbell customers the potential opportunity to benefit from improved "perfect" order stemming from order fill; on-time delivery and invoice accuracy; and improved sales revenue stemming from reduced out-of-stocks and promotional execution.

Built For Demand
To gain real-time visibility into demand so that Campbell can react to problems more quickly, Mastroianni turned to a familiar partner, Terra Technology. Mastroianni previously hired Terra Technology to install a Manugistics cost-optimization tool to help reduce total delivered costs. Mastroianni told Consumer Goods in October 2003 that, "Campbell Soup is realizing significant savings with the implementation of strategic initiatives developed with Manugistics Supply Chain Solutions and Terra Technology's consulting expertise."

At the 2004 Consumer Goods Technology Conference, Mastroianni explained to fellow consumer goods business and IT executives how Terra Technology moved beyond its consulting role to develop a custom-tailored solution that creates daily, accurate, short-term forecasts with 52 weeks of live data.
Terra Technology's Real-Time Forecasting (RTF) monitors order flow to detect demand changes, which are then used by the patent-pending statistical techniques to generate accurate daily forecasts for next month. "What these algorithms do is really focus on the short term," says Mastroianni. "They take the information that we have and work with it. Then, if we integrate it into our execution systems, we will have immediate visibility on the shop floor every day when we run our batch."
By accurately predicting demand, Terra Technology's solution is helping Campbell to stabilize its production schedules, reduce safety stock, improve service levels and most importantly, cut forecast error in half.

"The implementation of Terra's RTF has been an unquestioned success within our company," says Mastroianni. "The proof is in the pudding. The day we turned the [RTF] tool on, we dropped of 50 percent in error [from 41 percent to 21 percent]. From day one, the quality of our shipments from warehouses and plants has improved by that magnitude."