DuPont Goes Back to Basics

DuPont Coating & Color Technologies represents one of five business platforms within DuPont de Nemours, a $29-billion company. It has three divisions: an OEM division that delivers paint to car manufacturers; an industrial division that delivers paint to the heavy truck, marine and rail industries; and a refinish business that delivers paint to the automotive aftermarket sector. Together, the market dynamics of these three divisions make business planning extremely complex. The refinish business alone is charged to match more than 150,000 different colors in different qualities for most every car on the road.
  
At the same time, DuPont continues to innovate with advancements such as eco-friendly, waterborne refinishing paint technologies and the introduction of private label and economy lines to address new market segments.

As its market changed and DuPont's business continued to grow, its aging configuration of enterprise planning processes and systems was not keeping up with demand for its products.

The business had introduced Manugistics in 1995. At that time, the setup was supply centric -- meaning it was primarily focused on forecasting every item in every location from an operational perspective.

When the commercial organization assumed responsibility for demand planning, planners inherited 100,000 demand forecasting units and a traditional planning structure that did not provide adequate insight into market and product trends. In addition, the system's algorithms were not configured to effectively forecast the variety of demand patterns and dynamics of the business.

"There was little connection between low-level operational demand planning and higher-level sales and operations planning (S&OP)," explains Filip Buytaert, demand and business development manager Refinish EMEA for DuPont Performance Coatings.

Essentially, the company was missing a "go-to-market" planning capability for its sales and marketing function, and the means to link commercial decisions to the operational planning process.


Growth platform

In 2007, DuPont teamed with Digital Tempus to establish a planning process tuned for growth -- tapping into the company's expertise and business intelligence capabilities to optimize planning processes and systems, including that of JDA Software Group (which acquired Manugistics in July 2006) and SAP. The Digital Tempus team shadowed the DuPont team through multiple planning cycles, running side-by-side with their process and data to demonstrate more accurate techniques for business planning and forecasting.

Digital Tempus recommended a "back to basics" approach, removing unnecessary complexity from the planning process in order to transform the business from supply-driven into demand-driven. As part of the transformation, Digital Tempus helped DuPont reconfigure JDA Manugistics in a pragmatic way. Through the process, DuPont learned how to classify, prioritize and apply the appropriate capabilities of the system to improve forecast accuracy and service levels (including global market segments operating on legacy systems). For example, a simple 12 period moving average was used for sporadic models while more advanced models such as Lewandowski were introduced to better forecast trend dynamics.

This new configuration also introduced a go-to-market planning process that effectively linked the demand plan to multiple levels of the operating plan and stakeholder perspectives.

"By introducing multi-level forecasting and the appropriate reconciliation, we achieved sales intelligence -- getting field sales and customer information on the right level so that the demand planner could model forecasts correctly," explains Buytaert.

This new approach fits into a framework for DuPont Integrated Business Management (DIBM), which is the next generation of S&OP with more marketing, product management and finance involvement.


Picture This

Taking a back to basics approach to becoming demand-driven resulted in significant improvements in DuPont's sales, marketing and supply chain performance. The entire planning process has been simplified by way of multi-level forecasting and improved management of strategic segments of the portfolio and market. With this approach, DuPont achieved a 12 percentage point improvement in forecast accuracy.

"The improvement of forecast accuracy had a positive impact, mainly on service levels, but also helped with the ability to identify trends and ensure the effective execution of go-to-market strategies," says Buytaert.

Excess "non-productive" inventories were also reduced by approximately 15 percent. Combined, these improvements led to improved operating cash flow. In addition, increased visibility into trends and demand fluctuations has helped the supply chain team plan and execute more effectively, resulting in a 10 percentage point increase  in on time, in full deliveries.

DuPont is currently working to connect improvements in the demand planning process to improvements in supply planning, to more effectively manage future dynamics of the business and market. The business also intends to consolidate multiple regional instances of Manugistics into one global instance to support a common planning process.

"Digital Tempus is great in guiding us and keeping all levels in the organization aligned on the goals and implementation strategies," concludes Buytaert.