Seventh Generation Cuts Costs with S&OP
Seventh Generation is the nation’s leading brand of household and personal care products that help protect human health and the environment. A company fiercely committed to sustainable business practices, Seventh Generation had struggled with accurate demand forecasting and supply response. This led to missed revenue opportunities and unnecessarily high supply chain costs.
In its effort to continually support its dedication to sustainability, while providing high value products to the consumer, Seventh Generation needed to make a fundamental change in its planning and execution processes.
Working with Clarkston Consulting, Seventh Generation is adopting a Sales and Operations (S&OP) process that allows it to effectively forecast the growing demand and supply needs for its products. By adopting leading practices in S&OP (process, technology, metrics, and collaboration), Seventh Generation expects to improve forecast accuracy by 10 percent at the SKU level, decrease inventory by 15 percent, while maintaining historically high service levels.
“Prior to working with Clarkston on this project, the forecasting process rested in a silo within the Finance team. Through this effort, we have created open channels of communication between field sales, executive sales management, customer marketing, finance, operations and the executive leadership team,” says Julie Atwood, Director, Financial Planning & Analysis, Seventh Generation.
CHALLENGES & SOLUTIONS
Challenge 1: Increase collaboration/integration between demand and supply to synchronize inventory, service and asset utilization across the value chain.
Solution: Faced with higher costs of goods and services associated with running a company committed to sustainability, Seventh Generation needed to identify and implement an improved operating business model. Working with Clarkston, the company embarked on designing and adopting a S&OP process that would apply industry leading practices in the context of Seventh Generation’s culture, market/customers and product portfolio. This included: aligning organizational roles and responsibilities, developing the process activities and cadence, integrating the IT systems and establishing the appropriate metrics.
The project began with an S&OP assessment/gap analysis and development of an implementation roadmap. The roadmap identified and prioritized 17 improvement projects, which, when implemented, would result in a fully functional S&OP process. Recognizing that S&OP is a journey, not an event, the assessment focused on a feasible path for the organization to shift from a silo mindset (demand planning owned the forecast, supply owned the excess inventory) to cross-functional business collaboration. A “crawl-walk-run” approach was adopted, supporting the notion that it is better “to act ourselves into a new way of thinking, instead of thinking ourselves into a new way of acting.”
The first step in the roadmap was to develop a Consensus Forecasting process. Deemed “S&OP Lite,” this critical step would help break down the organizational barriers between key stakeholders and engage them in a process to collaborate on a single demand forecast. The new process leverages inputs from Sales, Marketing, Demand Planning, Finance and Supply Chain management and includes shared ownership for the resultant forecast — no more silos. To ensure organizational understanding and adoption of this new approach, Clarkston led training, communication and change management activities associated with the S&OP implementation.
Challenge 2: Include trade analytics and event management to further refine forecasting accuracy.
Solution: During the S&OP adoption process, the team realized that key trade promotion data was missing when developing the forecast. While Seventh Generation had a TPM solution in place, it was underutilized for event management and was not integrated with the demand planning system. Further, field sales directors managed trade planning outside of the system, so supply lacked visibility to coming events and promotions. The team agreed this trade data would be critical to the S&OP process, so a TPM enhancement effort was initiated.
Leveraging its existing TPM solution, Seventh Generation worked with Clarkston to develop a process for capturing and managing trade promotion events and spending. Through unique integration between the Infor Collaborative Demand Planner and the AFS/Synectics Account Review solution, the team was able to establish baseline forecasts and is building lift profiles for planned trade promotions. The resulting demand forecast then included expected lift from trade promotions and strategic growth drivers. With these key inputs in hand, the S&OP team could more reliably plan and manage the demand plan.
RESULTS
Through the course of adopting the S&OP process and TPM enhancements, Seventh Generation now has growing confidence in their supply and demand forecasting ability. The team has adopted a cadence that facilitates regular communication between supply and demand, and allows for more flexibility and responsiveness to changing market demand. Within the first nine months of adopting the basic elements of S&OP, the organization expects an increase in forecast accuracy by 10 percent at the SKU level. The company also has better visibility into promotions and new product launch demand signals so they can address opportunities in both sales and inventory management. Ultimately, the organization expects decreased costs of warehousing and distribution, leading to improved contribution margins.
Seventh Generation has also been able to improve value to the consumer — all without passing on any costs their way. With this new S&OP process, customers receive better service levels and new and innovative products without service disruptions.
At the management level, the company is able to make strategic-level decisions surrounding sales, trade planning and demand forecasting, allowing them to better evaluate their risk and opportunities associated with changes in the process. The S&OP process also allows the company to establish a baseline for future planning to come.
PARTNERING for SUCCESS
Partnering with Clarkston allowed Seventh Generation to focus on growing the business through new product distribution and new product innovation while developing the S&OP process in parallel. While Seventh Generation was able to focus on exciting new innovations in personal care and its existing product lines, Clarkston could focus on keeping the S&OP project on task. As new processes and stakeholders were introduced throughout the project, Clarkston was able to continually align project staff and time to keep pace with this fast-growing company.
Clarkston Consulting was chosen for this work based on its understanding of leading practices with S&OP, as well as its ability to align project objectives with the core values of the client. Seventh Generation and Clarkston Consulting both share a common belief in sticking to their core values and designing their businesses to be long lasting legacies that support and nurture many generations to come.
In its effort to continually support its dedication to sustainability, while providing high value products to the consumer, Seventh Generation needed to make a fundamental change in its planning and execution processes.
Working with Clarkston Consulting, Seventh Generation is adopting a Sales and Operations (S&OP) process that allows it to effectively forecast the growing demand and supply needs for its products. By adopting leading practices in S&OP (process, technology, metrics, and collaboration), Seventh Generation expects to improve forecast accuracy by 10 percent at the SKU level, decrease inventory by 15 percent, while maintaining historically high service levels.
“Prior to working with Clarkston on this project, the forecasting process rested in a silo within the Finance team. Through this effort, we have created open channels of communication between field sales, executive sales management, customer marketing, finance, operations and the executive leadership team,” says Julie Atwood, Director, Financial Planning & Analysis, Seventh Generation.
CHALLENGES & SOLUTIONS
Challenge 1: Increase collaboration/integration between demand and supply to synchronize inventory, service and asset utilization across the value chain.
Solution: Faced with higher costs of goods and services associated with running a company committed to sustainability, Seventh Generation needed to identify and implement an improved operating business model. Working with Clarkston, the company embarked on designing and adopting a S&OP process that would apply industry leading practices in the context of Seventh Generation’s culture, market/customers and product portfolio. This included: aligning organizational roles and responsibilities, developing the process activities and cadence, integrating the IT systems and establishing the appropriate metrics.
The project began with an S&OP assessment/gap analysis and development of an implementation roadmap. The roadmap identified and prioritized 17 improvement projects, which, when implemented, would result in a fully functional S&OP process. Recognizing that S&OP is a journey, not an event, the assessment focused on a feasible path for the organization to shift from a silo mindset (demand planning owned the forecast, supply owned the excess inventory) to cross-functional business collaboration. A “crawl-walk-run” approach was adopted, supporting the notion that it is better “to act ourselves into a new way of thinking, instead of thinking ourselves into a new way of acting.”
The first step in the roadmap was to develop a Consensus Forecasting process. Deemed “S&OP Lite,” this critical step would help break down the organizational barriers between key stakeholders and engage them in a process to collaborate on a single demand forecast. The new process leverages inputs from Sales, Marketing, Demand Planning, Finance and Supply Chain management and includes shared ownership for the resultant forecast — no more silos. To ensure organizational understanding and adoption of this new approach, Clarkston led training, communication and change management activities associated with the S&OP implementation.
Challenge 2: Include trade analytics and event management to further refine forecasting accuracy.
Solution: During the S&OP adoption process, the team realized that key trade promotion data was missing when developing the forecast. While Seventh Generation had a TPM solution in place, it was underutilized for event management and was not integrated with the demand planning system. Further, field sales directors managed trade planning outside of the system, so supply lacked visibility to coming events and promotions. The team agreed this trade data would be critical to the S&OP process, so a TPM enhancement effort was initiated.
Leveraging its existing TPM solution, Seventh Generation worked with Clarkston to develop a process for capturing and managing trade promotion events and spending. Through unique integration between the Infor Collaborative Demand Planner and the AFS/Synectics Account Review solution, the team was able to establish baseline forecasts and is building lift profiles for planned trade promotions. The resulting demand forecast then included expected lift from trade promotions and strategic growth drivers. With these key inputs in hand, the S&OP team could more reliably plan and manage the demand plan.
RESULTS
Through the course of adopting the S&OP process and TPM enhancements, Seventh Generation now has growing confidence in their supply and demand forecasting ability. The team has adopted a cadence that facilitates regular communication between supply and demand, and allows for more flexibility and responsiveness to changing market demand. Within the first nine months of adopting the basic elements of S&OP, the organization expects an increase in forecast accuracy by 10 percent at the SKU level. The company also has better visibility into promotions and new product launch demand signals so they can address opportunities in both sales and inventory management. Ultimately, the organization expects decreased costs of warehousing and distribution, leading to improved contribution margins.
Seventh Generation has also been able to improve value to the consumer — all without passing on any costs their way. With this new S&OP process, customers receive better service levels and new and innovative products without service disruptions.
At the management level, the company is able to make strategic-level decisions surrounding sales, trade planning and demand forecasting, allowing them to better evaluate their risk and opportunities associated with changes in the process. The S&OP process also allows the company to establish a baseline for future planning to come.
PARTNERING for SUCCESS
Partnering with Clarkston allowed Seventh Generation to focus on growing the business through new product distribution and new product innovation while developing the S&OP process in parallel. While Seventh Generation was able to focus on exciting new innovations in personal care and its existing product lines, Clarkston could focus on keeping the S&OP project on task. As new processes and stakeholders were introduced throughout the project, Clarkston was able to continually align project staff and time to keep pace with this fast-growing company.
Clarkston Consulting was chosen for this work based on its understanding of leading practices with S&OP, as well as its ability to align project objectives with the core values of the client. Seventh Generation and Clarkston Consulting both share a common belief in sticking to their core values and designing their businesses to be long lasting legacies that support and nurture many generations to come.