Dressing For Demand
The manufacturer of refrigerated dressings, dips and sauces, Litehouse Foods, was founded in 1963 by two brothers who expanded their father's restaurant in Hope, Idaho, so they could package and distribute the restaurant's signature salad dressing to local grocery stores.
The family-owned company has grown rapidly both in order volume and number of product lines, and today, it sells its products to mass retailers, national grocery chains and other food services organizations. Litehouse reached $100 million in sales for the first time last year, and is frequently launching new products and entering new sales markets, according to John Shaw, director of Information Technology, Litehouse Foods.
Commanding Enterprise Visibility
To help manage this growth and improve its ability to forecast demand for products, the company is relying on supply chain software technology from Ross Systems Inc. In May 1999, Litehouse installed Ross' iRenaissance enterprise resource planning (ERP) software to better track its inventory and improve customer service.
The ERP system helped the company avoid stockouts, oversupply and safety stock expense by allowing Litehouse to predict demand and effectively handle increased procurement and distribution complexity. The system gives the company increased visibility into the planning and production process and allows it to forecast consumer demand at a more granular level. That, in turn, has enabled Litehouse to enhance customer service and strengthen its relationships with retail partners, Shaw says.
Once Litehouse had achieved operational efficiencies with the ERP systems, managers at the company wanted even more accurate and timely demand forecasts to ensure that the right amount of inventory was available at the right time.
In November 2002, the company deployed Ross' iRenaissance SCM suite for its demand planning capabilities. The software allows suppliers to plan more proactively and accurately. It is designed to meet the needs of companies whose demand patterns shift frequently due to retail promotions, seasonality and other variables, Shaw says.
Shaw says Litehouse selected the Web-based iRenaissance SCM product because of the company's prior success with Ross software and because of the vendor's expertise working with food and beverage manufacturers. "Within the food and beverage processing industry, where you mix products and then package them, the ability of iRenaissance to be integrated at the recipe level is key," Shaw says.
Recipe for Success
Using the SCM software, Litehouse realized substantial cost savings in less than a year. The company increased product fill rates by 20 percent while at the same time reducing its finished goods inventory by 6 percent, saving considerably on carrying costs. The company also improved its reliability and forecast accuracy while significantly improving supply chain visibility.
Shaw says the demand planning tool has a sophisticated algorithm that allows Litehouse to forecast demand based on different criteria, such as fast-moving versus slow-moving products and cyclical items. For example, the company can more accurately forecast demand for products that sell better in certain seasons, such as apple-related products in the fall.
Using the demand forecasting data, Litehouse can now plan, modify and manage shipments at the customer level in a way that it could not before. The data generated by the system enables the company to proactively plan for trade promotions, improve overall collaboration with its trading partners and further increase customer satisfaction.
Shaw says current service levels average 95 percent for fill rate and 97 percent for on-time delivery. "We went to our customers and said, 'what do you consider good service?' and they said if we can ship orders complete and on time," Shaw says. The system enables Litehouse to meet those demands, he says.
Prior to the implementation of the Ross software products, Shaw says, Litehouse was using spreadsheets to track orders and shipments. With the spreadsheets, the company could forecast more than 1,000 units at the category level on a monthly basis. With the new system, Litehouse can forecast at the product level on a weekly basis, which is much more efficient and reliable.
The company says iRenaissance SCM gives it greater control over its production and planning processes, ensuring that the proper product mix and quantity are being produced. Improved production scheduling capabilities negate the need for emergency shifting mid-production, which is costly and time consuming.
Furthermore, Litehouse no longer has to maintain unnecessary safety stock to account for unexpected shortages. That has brought the company closer to a make-to-order production model and helped to reduce costs. This increased efficiency has enabled Litehouse to make better use of existing capital and human resources.
Preparation is Key
One of the key reasons for the successful deployment of the Ross software, Shaw says, was that Litehouse did a thorough analysis of its business processes before putting in the new software. "You can't just try to pull something off the shelf and lay it over your existing processes," he says. "You need to understand your business processes upfront before you apply the technology."
The software deployment has clearly been worth the effort. Shaw says the demand planning software paid for itself within 10 months -- mainly from reduced inventory levels.