Re-Engineering Demand Planning


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Re-Engineering Demand Planning

  1. 1. Re-Engineering Demand Planning: Case Study – C&S Wholesale Grocers 3/7/2007 Eric Winn Senior Manager Demand Planning C&S Wholesale Grocers
  2. 2. What should we accomplish today? <ul><li>Today, we will explore a case study of how C&S Wholesale Grocers has and continues to re-engineer its process of demand planning, how this has impacted our company efficiency, and how this can be applied to any organization, either with respect to demand planning or other core supply chain activities </li></ul>
  3. 3. Agenda <ul><li>C&S Wholesale Grocers – who are we? </li></ul><ul><li>Demand Planning at C&S </li></ul><ul><li>Re-Engineering Demand Planning Three Step Process </li></ul><ul><ul><li>Organization </li></ul></ul><ul><ul><li>Process </li></ul></ul><ul><ul><li>Technology </li></ul></ul>
  4. 4. C&S Wholesale Grocers – Who are we? <ul><li>C&S Wholesale Grocers is a wholesale and supply chain services provider for retail chains </li></ul><ul><li>and independents in the grocery industry </li></ul><ul><li>2 nd largest wholesale grocer in U.S. and 8 th largest privately held company </li></ul><ul><ul><li>Nearing $20 billion in annual revenue </li></ul></ul><ul><ul><li>Annual growth rates exceeding 10-20% </li></ul></ul><ul><li>Operating locations, including corporate offices and distribution centers across Northeast, Southeast, Midwest, California and Hawaii </li></ul><ul><ul><li>Over 60 distribution centers, across grocery, frozen, and perishable commodities </li></ul></ul><ul><li>Customer base focused on large retail chains, but also with substantial penetration into services for independent retailers </li></ul><ul><ul><li>Over 25 customers, including Ahold USA (Giant of Carlisle, Tops, Stop and Shop), A&P, Bi-Lo/Bruno’s, Safeway, Pathmark, Albertson’s, and Kroger </li></ul></ul><ul><li>C&S-operated retail units in Southeast and Northeast </li></ul><ul><ul><li>Nearing $1 billion in annual sales </li></ul></ul><ul><ul><li>Southern Family Markets and Grand Union </li></ul></ul><ul><li>C&S-affiliated third party logistics company – ES3 </li></ul><ul><ul><li>ES3 operates the largest grocery warehouse in the world in York, PA </li></ul></ul><ul><ul><li>Provides third party logistics for major grocery suppliers, such as Heinz, Unilever, Kraft, Del Monte, ConAgra, Campbell’s and others </li></ul></ul>
  5. 5. Demand Planning at C&S <ul><li>Demand planning for a $20 billion wholesale distributor servicing a large and diverse customer base is a complex process that must be managed with a dynamic and creative approach </li></ul><ul><li>Demand Planning Organization </li></ul><ul><ul><li>Centralized dedicated demand planning team supporting all procurement operations across the C&S enterprise (procurement teams located in more than five offices across the nation) </li></ul></ul><ul><ul><ul><li>Six customer-focused teams for promotional planning across nearly 20 retailers </li></ul></ul></ul><ul><ul><ul><ul><li>Dedicated teams for largest retailers, such as A&P and Stop & Shop, with other teams focusing on groups of smaller customers </li></ul></ul></ul></ul><ul><ul><ul><li>One team for managing pre-set retailer orders supporting display plans and other significant promotions </li></ul></ul></ul><ul><ul><ul><li>One team for managing the baseline demand forecasting system </li></ul></ul></ul><ul><ul><ul><li>Members of all teams engage in collaboration with suppliers and in internal operations planning </li></ul></ul></ul><ul><ul><ul><li>The central team is focused on all non-perishable (dry grocery and frozen) and dry perishable (i.e. dairy/deli) – directly accountable for forecasting approximately $15 billion in annual sales </li></ul></ul></ul><ul><li>Two major elements of demand planning at C&S </li></ul><ul><ul><li>Baseline demand forecasting </li></ul></ul><ul><ul><ul><li>Non-promoted items drive the other 50% of C&S’ volume </li></ul></ul></ul><ul><ul><ul><li>Procurement buyers have direct accountability for monitoring their baseline, or “turn,” forecasts and making adjustments for changes in the baseline plan, which can be driven by nuances, such as weather events, out of stocks on alternative items, and other special circumstances </li></ul></ul></ul><ul><ul><ul><li>Central demand planning team manages the baseline demand forecasting system </li></ul></ul></ul>
  6. 6. Demand Planning at C&S <ul><ul><li>Promotional planning and forecasting </li></ul></ul><ul><ul><ul><li>Approximately 10-30% of all items at C&S are subject to promotional activity at a retailer at any given time, driving 50% of C&S’ warehouse shipment volume </li></ul></ul></ul><ul><ul><ul><li>Customer teams work with their category management counterparts to forecast the promotions that are being planned in the next three to five weeks (including all flyer ads, brochures, coupon books, TPRs, display-only items, etc.) </li></ul></ul></ul><ul><ul><ul><li>These customer teams also monitor the promoted items to ensure that actual sales performance is in line with forecasts and react appropriately if it is not </li></ul></ul></ul><ul><ul><ul><li>There is a substantial level of collaboration between C&S and its retailers on promotional planning and forecasting, with three major operating models </li></ul></ul></ul><ul><ul><ul><ul><li>C&S-DRIVEN : C&S is 100% accountable for producing forecasts for promotional items, with input from the customer as related to event signals (price points, display plans, placement, etc.) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>SHARED : C&S is partially accountable for producing forecasts for promotion items, while the customer also retains partial accountability (i.e. customer provides forecasts for all major feature ad items, while C&S forecasts for all minor feature ad items and TPRs) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>CUSTOMER-DRIVEN : retailers are 100% accountable for producing initial forecasts for promotional items, and C&S engages in collaborative activities to finalize and optimize the plans </li></ul></ul></ul></ul><ul><ul><ul><li>C&S has also begun engaging in collaborative planning activities with suppliers, with several pilots already underway </li></ul></ul></ul><ul><li>This is how C&S engages in demand planning today. How did we get here? A re-engineering process began in mid-2005 and continues today... </li></ul>
  7. 7. Building Blocks of the Re-Engineering Process Organization: People and Productivity Target: Maximize Efficiency in Core Activities to Help Build a Premier Supply Chain Organization Process: Rationalization and Standardization Technology: Automation and Accuracy Fundamental to any change process within an organization is the foundation. Here, the foundation is the organization itself, with a focus on people and their productivity
  8. 8. Re-Engineering Demand Planning: Organization <ul><li>The process of re-engineering demand planning (or any department in any firm) begins with the organization – at C&S, we had three critical paths to changing the organizational design </li></ul><ul><li>Talent acquisition and development – it is critical to hire and develop talented resources </li></ul><ul><ul><li>Forced ranking and other such evaluation activities in the past 6-12 months have provided substantial value and “forced our hand” on managing and replacing the low-performers and identifying the mid and high-performers in need of further development </li></ul></ul><ul><ul><ul><li>We have experienced moderate attrition (voluntary and involuntary), with more highly selective hiring/replacement processes, which has driven a substantial improvement in the quality of output per unit of input </li></ul></ul></ul><ul><ul><ul><li>We have promoted a substantial number of our personnel from within, building out a strong middle management group that is better equipped to drive the organization to further heights </li></ul></ul></ul>
  9. 9. Re-Engineering Demand Planning: Organization <ul><li>Surgical task/activity re-assignment – it is critical to place people in roles where they have a comparative advantage </li></ul><ul><ul><li>We have engaged in creative re-organization initiatives, such as identifying the comparative advantage people/activities, finding lower cost alternatives and synergistic pilots </li></ul></ul><ul><ul><ul><li>Greater than 50% of the members of the demand planning organization at C&S are currently tasked with activities vastly different from those against which they were allocated 12 months ago </li></ul></ul></ul><ul><ul><ul><li>We have replaced a significant portion of our salaried work-force with lower cost hourly personnel in the past 12 months </li></ul></ul></ul>
  10. 10. Re-Engineering Demand Planning: Organization <ul><li>Consolidation/centralization – it is critical to consolidate teams and activities that have synergistic resource and process characteristics </li></ul><ul><ul><li>We have driven substantial consolidation of teams, centralazing management of different functions and commodities to a single group </li></ul></ul><ul><ul><ul><li>Substantial increase in activities per promotional planning FTE by expanding commodities and customers managed by centralized group </li></ul></ul></ul><ul><ul><ul><ul><li>Expansion from 8 to nearly 20 retail customers with full expansion to over 25 planned for next three months </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Expansion from dry grocery/frozen to include ice cream, frozen meat, dairy, GM HBC and others </li></ul></ul></ul></ul><ul><ul><ul><li>Ad forecasting, turn forecasting, and pre-set ad/display order management all consolidated from three teams to a single group </li></ul></ul></ul><ul><ul><ul><li>Significant overhead reduction achieved directly via consolidation activities </li></ul></ul></ul>
  11. 11. Building Blocks of the Re-Engineering Process Organization: People and Productivity Target: Maximize Efficiency in Core Activities to Help Build a Premier Supply Chain Organization Process: Rationalization and Standardization Technology: Automation and Accuracy A key building block on the foundation is a rationalization and standardization of the business processes employed by the organization
  12. 12. Re-Engineering Demand Planning: Process <ul><li>The second pillar of re-engineering demand planning entails a three-pronged approach to process change </li></ul><ul><li>Consolidation/standardization – consolidating an organization achieves nothing without also consolidating and standardizing disparate processes </li></ul><ul><ul><li>After consolidating the various groups and activities, we engaged in rationalization of the processes </li></ul></ul><ul><ul><ul><li>We replaced dozens of processes across customers and commodities with fewer than ten, with further streamlining planned for the next 6-12 months </li></ul></ul></ul>
  13. 13. Re-Engineering Demand Planning: Process <ul><li>“ Light” technology and business practice improvement – it is important to implement small-scale technologies (home-grown) and improve business practices </li></ul><ul><ul><li>Utilizing the traction gained from a larger and better organization, we have been able to innovate using in-house resources </li></ul></ul><ul><ul><ul><li>We have implemented over ten home-grown technologies that have helped to enable further consolidation activities and productivity improvements </li></ul></ul></ul><ul><ul><ul><li>We have eliminated dozens of process touch-points, to have the activities directly impact the business where it can drive the most value </li></ul></ul></ul>
  14. 14. Re-Engineering Demand Planning: Process <ul><li>Expansions – assuming processes can be improved and streamlined, it is critical to re-invest some of the “saved” resources into incremental value-added activities </li></ul><ul><ul><li>We have substantially expanded the scope of the demand planning organization </li></ul></ul><ul><ul><ul><li>Interface with warehouse operations to aid in inbound/outbound capacity planning </li></ul></ul></ul><ul><ul><ul><li>Collaborative forecasting pilots underway with three suppliers with plans to expand to over ten </li></ul></ul></ul><ul><ul><ul><li>Improved collaborative activities with retail customers, including increased on-site presence </li></ul></ul></ul>
  15. 15. Building Blocks of the Re-Engineering Process Organization: People and Productivity Target: Maximize Efficiency in Core Activities to Help Build a Premier Supply Chain Organization Process: Rationalization and Standardization Technology: Automation and Accuracy The final building block in the re-engineering process is technological enablement of the business processes employed by the organization
  16. 16. Re-Engineering Demand Planning: Technology <ul><li>The third and final pillar of the re-engineering process is implementing technology to drive three major incremental improvements </li></ul><ul><ul><ul><li>Improved forecasting </li></ul></ul></ul><ul><ul><ul><li>Automation of manual processes </li></ul></ul></ul><ul><ul><ul><li>Improved visibility and control </li></ul></ul></ul><ul><li>C&S is implementing the Demantra-Oracle demand planning application </li></ul><ul><li>Initial functionality (baseline demand forecasting) implementation go-live was in late January 2007 with continued roll-out for entire enterprise through end of March </li></ul><ul><li>Future functionality (promotional demand forecasting and workflow management) implementation will occur throughout the latter part of 2007 and into 2008 </li></ul>
  17. 17. Re-Engineering Demand Planning: Technology <ul><li>Improved forecasting – the most obvious and immediate benefit of implementing a demand planning technology application is improved forecasting – Demantra is best-in-class </li></ul><ul><ul><li>Significant inventory reduction </li></ul></ul><ul><ul><li>Sustained higher and more consistent service levels to retailers </li></ul></ul><ul><ul><li>Lower operating costs </li></ul></ul><ul><ul><li>Business process improvement and expansion </li></ul></ul><ul><ul><li>Productivity gains </li></ul></ul>
  18. 18. Re-Engineering Demand Planning: Technology <ul><li>Automation of manual processes – data management and forecasting processes are currently highly manual – Demantra will automate both processes to allow for exception-based management </li></ul><ul><ul><li>Currently each sku/event combination is treated with equal resource investment, regardless of forecasting difficulty, volume, and impact, and the forecasting and data management processes are highly manual </li></ul></ul><ul><ul><li>Expectation is automation and no-touch of up to 80% of sku/event combinations, with resource reinvestment into the remaining 20% with an exception-based management approach </li></ul></ul><ul><ul><li>Expectation is near full automation of data management processes, with resource reinvestment into analysis and utilization of the data </li></ul></ul>
  19. 19. Re-Engineering Demand Planning: Technology <ul><li>Improved visibility and control – it is currently highly challenging to gain direct and true visibility into how forecasting can impact the supply chain – Demantra will enable significantly more visibility and opportunities for execution </li></ul><ul><ul><li>Expected improvements in internal operations planning </li></ul></ul><ul><ul><li>Expected improvements in collaborative activities with retail customers </li></ul></ul><ul><ul><ul><li>Where is C&S challenged and where should we improve? </li></ul></ul></ul><ul><ul><ul><li>Where are the customers challenged and where should they improve? </li></ul></ul></ul><ul><ul><li>Expected improvements in collaborative activities with suppliers </li></ul></ul>
  20. 20. Future Vision: Reaching and Surpassing the Target Organization: People and Productivity Target: Maximize Efficiency in Core Activities to Help Build a Premier Supply Chain Organization Process: Rationalization and Standardization Technology: Automation and Accuracy In order to become a premier, world-class supply chain management company, C&S must continue to re-engineer its Demand Planning and other departments, focusing on organizational change, process improvement, and technology implementation and utilization
  21. 21. Checklist for the Re-Engineering Process in any Organization <ul><li>Organization </li></ul><ul><ul><li>Do you have the right people? Acquire and develop talent! </li></ul></ul><ul><ul><li>Are your people most efficiently deployed? Re-assign tasks and don’t be afraid to take risks! </li></ul></ul><ul><ul><li>Can you consolidate synergistic activities? Centralize to a single point of management! </li></ul></ul><ul><li>Process </li></ul><ul><ul><li>Are you employing consistent processes? Rationalize and standardize! </li></ul></ul><ul><ul><li>Can you improve your processes? Eliminate touch-points and wasted effort! </li></ul></ul><ul><ul><li>Have you identified other value-added activities? Be creative and reinvest savings! </li></ul></ul><ul><li>Technology </li></ul><ul><ul><li>Can you utilize technology to improve accuracy? Achieve precision! </li></ul></ul><ul><ul><li>Are your processes still manual? Automate! </li></ul></ul><ul><ul><li>Do you have the right level of data utilization? Gain visibility and control! </li></ul></ul>