Swimming in the Deep End
Today's CG supply chain is akin to the spilt personality of Dr. Jekyll and Mr. Hyde. One moment, it's well mannered and productive. Then, from out of nowhere, it transforms into a frantic presence that can negatively affect the bottom line. So how can CG companies get more Jekyll and less Hyde?
Sharing forecasting and demand data between manufacturer and retailers can address many supply chain issues before they arise.
"What's happening right now is that market leaders have recognized that in having deeper collaboration with their demand chain or their supply chain they're able to have a faster time to market," says Reed Cundiff, senior vice president, software, services and infrastructure, Yankee Group, a Boston-based technology research firm. "Everybody is trying to figure out how to enable this technically. Web services, integration technologies and CPFR are new concepts that can enable this type of inter-enterprise collaboration."
POOLING RESOURCES
When Whirlpool Corporation, a worldwide manufacturer of home appliances based in Benton Harbor, Michigan, examined its supply chain, company executives determined the manufacturer was lacking in demand management. Planners typically relied on spreadsheets to determine demand.
"We would download our stuff onto Excel spreadsheets, put it next to our retailers' forecasts, and go item by item trying to pinpoint numbers based on that line comparison," says Nikhil Sagar, project manager of supply chain, Whirlpool Corporation. "Then i2 came in with supply chain planner."
Supply chain planner is a part of the supply chain management suite from i2 Technologies, Dallas, Texas. It allows Whirpool to feed its forecast into the i2 system, which then segments its communication with retailers based on predetermined tolerances. The i2 system generates exceptions based on those tolerances, which provides much cleaner data than before.
"The discussion is then focused on those exceptions," says Sagar. "It is much quicker and much more holistic. There's less room for error."
Whirpool communicates with retailers through a weekly conference call. Both parties log onto the Internet and into the i2 system from different locations. They look at the exact same screens and confer on the differences being flagged. During the course of the discussion both parties agree on a final number, which is entered into the i2 tool by either party. By hitting an "update" button, numbers are automatically updated.
"The closure to that process is the final collaborative numbers and feedback," says Sagar. "This is a weekly cycle that adds significant improvement at the SKU level."
Ultimately, the supply chain planner process reduces the amount of money held up in both inventory and operational costs. Production lines become more stable and there is less churn. That translates into better rates from Whirlpool's procurements and suppliers.
CPFR INITIATIVE
CPFR (Collaborative Planning, Forecasting and Replenishment) is a collaborative demand management tool that strengthens the trading exchange with Whirlpool's retailers. In essence, it helps manufacturers, wholesalers and retailers collaborate on strategic plans, merchandising optimization and order forecasting and replenishment.
Within this CPFR process Whirlpool utilizes a section on order collaboration where it actually commits a four week forecast from a supplier standpoint.
"The retailers come back and commit to purchasing what we've supplied," says Sagar. "It allows us to justify protecting that forecast."
If a retailer ordered 400 pieces, for example, and Whirlpool can only provide 300, it is recorded into the i2's Web-based tool to avoid a dispute.
"What has been integral to all of this is the mind shift of the trade partners to actually share this information," says Sagar.
BEEFED UP BUSINESS
For Chicago-based Vienna Beef, a global manufacturer of meat and deli products, sharing data is a vital part of maintaining a healthy supply chain, and the most efficient way the company plans to share its data is through the Internet.
"There are more industry standards around coding structures and identification," says Tim Jackson, senior vice president administration, Vienna Beef. "Layer in the Internet and XML and you have the opportunity to share data with a fraction of the cost of five years ago."
About five years ago, the only companies able to leverage technology to enhance their supply chains were the largest manufacturers with huge scale benefits, according to Jackson. Nowadays, the tools allow the small guys to compete, Jackson says.
"We won't be able to compete at the level of Sara Lee in terms of technological resources," says Jackson. "Intentia gave us a glimmer of hope that we can get that kind of technology."
About six months ago, Vienna Beef went live with Movex Food & Beverage enterprise suite from Intentia, which integrates Accounts Payable, Procurement and Inventory and Warehouse Management applications. The company runs Movex Version 12 on an IBM iSeries/400 platform. Movex is a full, Internet-based solution that will expose Vienna Beef's data structures to its supply chain partners, "so that the whole collaboration piece is real."
VISIBLE RESULTS
"Visibility of process, to me, is the number one advantage," says Jackson. "The more visibility you get, between work groups and how the product gets transformed and what the needs and expectations are of the people that work downstream from you, the more effective you become."
Movex is targeted to replace Vienna Beef's current ERP system, in a multi-year approach. Jackson said the company did not adhere to rigid payback analysis, choosing instead, to target ROI in excess of 25 percent as a bare minimum.
According to Jackson, the company switched from "money going out the door to savings coming in the door."