Del Monte Puts the Customer First
The customer truly is boss at Del Monte Foods. So much so that in June 2006, the company launched a $100 million transformation plan to further become a more value-added, consumer packaged foods company. The Master Plan
As part of its transformation plan, Del Monte was able to pull off a collaborative feat that is rarely seen in the consumer goods industry. The information technology (IT) and supply chain teams willingly worked in concert to implement supply chain efficiencies. Based on what was important to customers, Marc Brown, SVP Corporate Service Center and CIO, and Dave Allen, SVP Supply Chain, first collaborated on the business case for a demand-driven supply chain and set two immediate goals, both focused 100 percent on the customer rather than on their functional needs as separate business units:
- Enable its retail customers to operate at greater than 99 percent in stocks on shelf
- Run the supply chain with negative working capital, meaning that the retailer distribution center and store inventories have already been sold and converted to cash before it's time to pay the manufacturer.
"Together, we embarked on a mission to be recognized as the best supply chain in the dry grocery space by our customers," says Brown. "To be successful, we needed to build out and refine capabilities around three key areas: planning, execution and responsiveness."
The company had to overcome two major hurdles. First, different functions were sometimes using disparate practices and systems to develop forecasts. Second, Del Monte's sales team had a lot of information about customer activity, yet the company was not always capturing and synthesizing the data to plan and execute effectively against promotional activities, distribution changes, competitive pricing impacts, etc.
Thus, the IT and supply chain teams consolidated forecasting processes and systems into a single demand planning process called Enterprise Volume Forecasting (EVF), which acts as the platform for sales and operations planning (S&OP) and is enabled by JDA's Demand Manager, developed by i2 Technologies. [Editor's note: JDA officially acquired i2 in January 2010.]
"In JDA, we can view base and lift data by customer and channels, sales, financial or geographic hierarchies. This supports our interaction with field sales," reports Robert Lim, VP, Production Planning Inventory Control, Del Monte. "Our demand planners use JDA to develop statistical forecasts, analyze trends and exceptions, and manage the development of the driver-based, cross-functional consensus forecast."
Recently, Del Monte took five days out of the S&OP cycle and saw a forecast accuracy improvement of more than 400 basis points.
The Value of Execution
However, even the best S&OP process suffers from blind spots. Often times, marketplace dynamics change too rapidly for a monthly process to keep pace. According to Allen, 90 percent of your supply chain value comes from efficient execution.
"The plan is always going to change," he says. "We needed capabilities that would enable us to respond to any deviation from our demand plans at the point of sale."
Del Monte wanted to use point-of-sale (POS) data as a demand signal that directly drives execution. Del Monte calls this its Demand-Driven Operating Model, which is enabled by software as a service (SaaS) from One Network Enterprises.
One Network generates demand signals from daily POS data and combines them with the EVF forecast from JDA to drive inventory replenishment transactions. Del Monte uses One Network to plan transportation orders and schedule carrier appointments. Plus, customer teams use the tool to monitor and anticipate out of stock events and collaborate with customer replenishment teams.
Allen notes that flexibility was critical when selecting a solution as each retailer varies when it comes to sharing POS data.
"The retailers who have the best performance are ready to collaborate and provide POS data," adds Brown. "Others may not be able to provide the same level of visibility or may not be culturally ready to collaborate, so we do what we can with each retailer and try to find the benefits on a case by case basis."
"One Network understands the various challenges that retailers face and part of their business strategy is to solve those challenges along with us," says Lim.
Worth Every Penny
The supply chain improvements enabled by JDA and One Network combined have sped up the heartbeat of Del Monte's supply chain. Because the project had senior level sponsorship across all business functions involved, user adoption was not an issue. Sales teams were eager to provide improved service levels to key retail accounts from the start.
"They know that if they efficiently communicate their retail execution plans to our supply chain team, then they are going to get better results on the back end. This has really played out," reports Brown.
Supply chain planners also took well to the system, moving from a manually intense, sequential, brute force process to a highly dynamic, enterprise-wide process that enables them to better serve the sales teams. This also frees up time for planners to focus on better managing exceptions and supporting higher value activities, like new product introductions and reducing obsolete inventory.
In addition, marketing can more easily create consumption-based forecasts, and the finance department can drive more accurate financial forecasts based on the EVF plan.
With more than half of its retail volume and all of its internal replenishment transactions now operating on a demand-driven operating model (this project was never piloted), Del Monte is experiencing impressive results aside from process improvements. For the last nine months, it has been running at greater than 99 percent case fill rate. More importantly, in stocks for customers in the program are running at above 98 percent to 99 percent during key promotional periods, with inventory effectiveness getting customers on the path toward negative working capital.
"Our key customers tell us that we are setting the benchmark for innovation in supply chain performance," closes Brown. "We believe this helps to differentiate us."
But like all business improvement projects, the work is never done. Del Monte is now working to extend the demand-driven operating model to its network of suppliers and co-packers.