Brown-Forman's Supply Chain Improves with Age

Founded in 1870 in Louisville, Kentucky, Brown-Forman Corporation gave America its first bottled bourbon -- Old Forester Kentucky Straight Bourbon Whisky. Today, Brown-Forman is also among the world's top 10 spirits companies; imports wines from all over the world; and offers a portfolio of more than 35 brands, including Jack Daniel's, Southern Comfo
rt and Finlandia Vodka.

A History of Growth

Whether by local law or long-held tradition, the alcoholic beverage industry leans toward exclusive distribution, which can lock unlucky companies out of key markets. In 1923, Brown-Forman secured one of only 10 U.S. licenses to bottle medicinal whisky during prohibition and was therefore able to acquire whisky maker Early Times, which had not. Brown-Forman continued its domestic acquisitions, such as Jack Daniel's Tennessee Whisky, and secured U.S. distribution rights for international products such as Korbel Champagne. Although it was becoming one of the largest American-owned spirits and wine companies, its domestic growth did little to ensure access to international markets.


Global Expansion

To gain an international foothold, Brown-Forman formed a joint venture with Altia Corporation in 2000 for global distribution of Finlandia Vodka, and by 2004 it acquired full ownership of the brand. The company put a global sales and operations planning process in place by leveraging the SAP Advanced Planning & Optimization (SAP APO) component of the SAP Supply Chain Management (SAP SCM) application and cut forecast error by more than a third by 2005.

Brown-Forman also purchased French firm Chambord Liqueur in 2006 as well as Mexican tequila producer Casa Herradura in 2007. Because Casa Herradura was running SAP software, Brown-Forman could exchange master data with it quite literally overnight.

The company also looked to distribution partnerships where growth can be faster, but where visibility into inventory levels and demand is critical. With SAP SCM, Brown-Forman increased the number of combined item/
locations offered in some regions while maintaining 12 inventory turns per year and more than 99 percent service levels. And again, for a distributor already running SAP software, the on-boarding process was a "nonevent" because the two companies "spoke the same language." Brown-Forman met its long-term inventory targets within a few months of start-up.

On the domestic front, SAP SCM helped Brown-Forman align production, material and storage constraints with projected demand. This alignment resulted in a reduction of more than 40 percent of finished goods inventory over a two-year period. Out of stocks were cut as were materials obsolescence costs.

Global distribution -- for items such as Finlandia Vodka -- required a planning process that synchronized global sales with regional production. Information sharing based on SAP SCM supported this process, and now, instead of expensive, carefully coordinated business trips to Finland, Kentucky-based supply chain executives can hold meetings with resources in Finland readily via teleconferences.


A Return on People

A four-person team at Brown-Forman used to collect, aggregate and distribute demand data among the sales and marketing staff and supply planning
stakeholders. Now, reports are produced automatically with the SAP NetWeaver Business Intelligence component and published throughout the organization with the SAP NetWeaver Portal component. Thus freed up, the team now focuses on value-added services, such as increasing forecast accuracy through process improvements.

"Because of the planning books and views we have built in SAP Advanced Planning & Optimization, we have more accurate forecasts with less manual effort," says Steve Whitmer, demand planning manager, Brown-Forman Corporation.

Brown-Forman continues to expand its product line and global market distribution, while reducing inventories and maintaining excellent customer service. Like its Jack Daniel's whisky, Brown-Forman's investment in supply chain management improves with age.

 "What SAP Supply Chain Management has enabled us to do is expand our products and distribution network while meeting the Sarbanes-Oxley requirements without taking on additional staff," reports Jim Hutchinson, senior vice president of Supply Chain Management, Brown-Forman Corporation.