Tyson Foods Gets the Big Demand and Supply Picture

When Tyson Foods purchased IBP Fresh meats in 2001, the Springdale, Ark.-based outfit officially became the largest meat processing company in the world, servicing retail, wholesale and food service customers in the United States and 80 countries overseas. Over the years, Tyson has diversified its product portfolio, becoming the $26 billion "protein powerhouse" that it is today. Pre-cooked meats, refrigerated and frozen prepared foods and animal feeds round out Tyson's product line. Tyson is also the world's largest supplier of tortillas, servicing many of the major U.S. convenience restaurants.
 
But where Tyson really differentiates itself from other food manufacturers is its poultry operation, according to Carla Woods, vice president of information systems, Tyson Foods. "We are vertically integrated so we grow our own raw material," says Woods. "We hatch our own chickens, provide them to contract growers, supply the fuel to keep the birds warm, mix the feed for them to consume and provide technical assistance along the way. Then we bring the birds to the plant for processing. It's a push industry instead of the classic pull environment used by discrete manufacturers. We also produce co-products as well as by-products. All of this makes it a little bit more challenging from a planning perspective."

For instance, if there is suddenly high demand for a particular cut of meat, then Tyson has to figure out what to do with the remainder of the product. This has become one of the biggest challenges of the company's chicken, beef and pork divisions. "We're buying whole cattle," says Woods. "If you're cutting the primal in a particular way, say a particular steak, you get to a point where you can't turn back. If a customer wants to buy prime rib and you already have it cut into rib-eye, it's a challenge."

A Fresh Approach
To generate one view of demand across its supply chain, sales and marketing operations, Tyson utilizes JDA's Demand, Fulfillment, Strategy, Collaborate and Market Manager solutions. Tyson also uses JDA for Transportation and Load Building across all of its divisions. "It helps tremendously when combining loads for efficiency purposes," says Woods.

The tool is also helping Tyson manage huge demand spikes that occur between its fresh and frozen foods. "It's more of a challenge to plan demand for fresh items than it is for frozen," says Woods. "With frozen you can build inventory to take care of those times when there is huge promotional demand."

On Superbowl Sunday, for instance, there isn't enough production capacity or enough chickens to push through the Tyson plants in the few weeks leading up to the event to make enough chicken wings. "One of the primary ways that we depend on JDA is to accurately build inventory for big events, like Superbowl Sunday, so that we don't run up inventory too early or too late," says Woods.

From a supply perspective,   Tyson gains an accurate view of incoming birds based on a plan created 18 months prior, according to Howard Alsdorf, director, information systems, Tyson Foods. "We can quickly and easily look at the line times, line configurations and which plants have down time coming up, giving us a good indication of what our production capabilities are."

In the case of Superbowl Sunday, Tyson knows a large supply of chicken wings are required, which is also reflected as a part of the overall supply plan, according to Alsdorf. "On the supply side, JDA allows us to create a target inventory level that contains what we would normally produce plus any pre-build that's going to be required to meet a given point in time."

Past Versus Present
On the demand side, Tyson utilizes JDA Demand, Collaborate, Monitor and Market Manager solutions. According to Alsdorf, Tyson demand involves looking at three years of the company's sales history and creating a statistical demand forecast. Once that forecast is available, Tyson uses Collaborate and Market Manager modules to track items such as promotional activities. Any additional information is added by Tyson's demand planners to make the forecast more accurate. "We have a very comprehensive sales & operations planning process in place whereby the demand planners stick to a monthly schedule to make sure they have entered in all of the proper information and looked at the demand forecast," says Alsdorf. "Once solidified, we take a snapshot of it."

Tyson can take periodic "snapshots" of its demand forecast, a process that allows the company to take internal measures each month to ensure that the right amount of sales are being generated from the forecasts. "We measure the business unit according to the inaccuracy of the forecast versus what is actually sold," adds Alsdorf.

Tyson also relies on technology to produce accurate inventory levels for school lunches. Every year, just before school starts, Tyson is inundated with huge order volumes from schools placing orders for Tyson's patties, nuggets, chicken rings and burrito-type food products. By March and April, the orders dissipate as schools use stock leftover in their freezers.

"But you still have the issue of having the right amount of inventory so that enough product meets school demand again in the fall," says Woods. "It's not a good idea to sit on a lot of excess inventory from April to July because that costs money. It's imperative to start production to meet school lunch demand just in time to ensure product is available when needed."

Global Growth
Next on Tyson's strategic menu is the growth of its international business. Part of this strategy is to accelerate the growth of its production footprint offshore. "We will then be faced with the challenge of integrating our international systems with our domestic systems where applicable," says Woods.

"There have been no issues with the scalability or the ability to add business units to the existing JDA environment," adds Aldorf. "We are very optimistic about our company's future and look forward to depending on JDA to help us meet our goals."