Taste of Success
The grower-owned marketing cooperative Sunsweet Growers represents more than one-third of the prune market worldwide and provides some 40,000 cases of dried fruit products to retail and foodservice outlets each day. Over three years, service levels increased from 98 percent to 98.5 percent. Cycle time for finished goods planning was reduced from five days to four hours. Transportation cost per unit has remained flat for the last two years despite rising fuel costs and increased requirements for costly refrigerated shipments. Pitter utilization (one of the largest capacity constraints) has increased from 84 percent to 92 percent, attributed to the ability to optimize cost and constraints over several months rather than react on a weekly basis. Overtime reduced from an average of 23 percent to 10 percent. Operating standards for production lines increased from 85 percent to 90 percent of equipment maximum. Finished goods spoilage and obsolete packaging materials were reduced by nearly 30 percent.
Like most consumer goods companies at one point or another, Sunsweet Growers faced supply chain concerns stemming from a spreadsheet-based planning system. Complicating the situation, the historically stable prune market had become increasingly volatile due to excess inventory levels and production capacity.
"The volatile market, increased SKU complexity and variation in supply impacted the accuracy of our sales forecast and our production cost," says Harold Upton, vice president of Strategic Business Processes for Sunsweet Growers.
The scope of Sunsweet Grower's supply chain needed to expand beyond managing finished goods inventory levels and into managing supply constraints, MRP, production cost and capacity constraints, SKU complexity, sales forecast accuracy, transportation, warehousing and customer satisfaction -- requirements that exceeded the capabilities of its spreadsheet-based system.
REPLACEMENT PLAN
To better plan and forecast, Sunsweet Growers gathered product information from more than 30 different supply chain solution companies. Cost, functionality, ease of use and maintainability were key selection criteria. The replacement solution also needed to provide a fully integrated package of functionality that meshed with an existing SAP backbone.
Supply Chain Consultant's Zemeter supply chain planning suite with modules for forecasting, collaboration, inventory planning, supply planning and finite scheduling fit the bill. Sunsweet Growers divided the implementation into five phases -- Demand Planning, Inventory Management, Production Optimization, Finite Scheduling and Collaborative Forecasting -- leveraging the functionality of each module along the way rather than waiting until the end of the project to realize return on investment.
"The ability to rapidly implement and leverage each module prior to moving into the next phase was extremely attractive in our rapidly changing environment. The modules were structured very closely to the way our planning department operated and the user interface was very easy to use and understand," reports Upton.
The first phase, Demand Planning, began in May 2003 and had replaced the use of spreadsheets by the end of June 2003. "We averaged about 40 days of implementation per module and allowed time after each module for users to get functional before moving on to the next phase." The final phase, Collaborative Forecasting, went live in June 2005.
The implementation was completed on budget and return on investment was realized before the entire suite was even implemented -- one and a half years earlier than expected.
PAST VERSUS PRESENT
Using Demand Planner, Sunsweet Growers can use a statistical forecast to pinpoint changes in demand quickly, and thus develop a more accurate forecast. The company can also re-align shipment history, which enables Sunsweet Growers to exclude, reposition or reclassify customer shipments. "Demand Planner also disaggregates the forecast by ship plant more accurately than we were able to previously," says Upton. "As volumes shift between ship points, Demand Planner adjusts the forecasts by location as needed."
At the same time, Supply Planner has improved plant scheduling through better long-term planning. It automatically shifts production demand between items to make room for make-to-order items that have shorter lead times. Supply Planner minimizes service issues, manipulating the production requirements to incorporate transit times to forward warehouses, safety stock requirements by ship point and required service levels by item. Previously, this was done by spreadsheet and was in no way as flexible, easy to manipulate or accurate as it is now.
Sunsweet Growers also established an S&OP process with which it analyzes long term plant demand and how it relates to inventory levels. "We are able to notify operations of any changes in demand, and thus manning, months in advance, instead of weeks," says Upton. Sunsweet Growers is also able to schedule required downtime into the model and come up with a production plan that takes it into account.
THE RIPPLE EFFECT
While it is difficult for Upton to tie exact numbers to these improved planning and optimization capabilities, he identifies some encouraging trends since implementation:
These results have made significant contributions to the highest member returns in the history of the company.
In the near term, Sunsweet Growers will continue to adjust targets and goals based on maximizing total profitability.
"Maximizing our supply utilization while minimizing our production distribution costs continues to be key," says Upton. "When our sup ply stabilizes, we will refocus on leveraging collaborative forecasting in order to increase the accuracy of our sales forecast."