Arla Foods Implements Demand Solutions in 19Days
Immediate returns in better fill rates, reduced obsolescence
About two years after Arla Foods Inc. purchased National Cheese in Canada, the Canadian President and CEO Doug Smith wanted to improve inventory control and fill rates with its 5,000 customers across the country. Arla Canada is a subsidiary of an $8 billion farmer-owned cooperative based in Denmark, which sells such well-known brands
as Rosenberg Blue Cheese, Tre Stelle Fine Italian Cheeses, Dofino Havarti, Mediterra & Apetina Feta and Buko Cream Cheeses. It employs 22,000 people.Besides Denmark, Sweden and the UK, Arla Foods operates subsidiaries in the 19 most important export markets. The Group exclusively produces milk-based products. Besides Denmark, Sweden and the UK, Arla Foods has production plants in Saudi Arabia,
Argentina, Brazil and Poland and licensed production in USA and Canada.
In 2006, Smith brought on board Chris Provost to be Logistics Director for all supply chain operations excluding production. An experienced supply chain expert with hands-on experience installing complexsupply chain systems, his job was to oversee the implementation of all SAP supply chain functions nationally including APO, the company's global standard for supply chain planning. However installing SAP was scheduled to take a year or more, and Arla could see it needed a fast, effective interim solution.
Provost, who had worked previously with Demand Solutions, proposed implementing three modules, DS Forecast Management (DS FM) for demand planning,DS Requirements Planning (DS RP) for inventory and distribution management, and DS Rough Cut Capacity
Planning (DS RC) for production scheduling. These modules would solve his supply chain challenges.However, he also had issues in his ERP infrastructure,which he could not wait for SAP to solve. He proposed
using Microsoft Access as a connectivity layer, data filter, and storage system. It would connect to the ompany's aged accounting Providex system while SAP was implemented over the next year so that they could
emulate an ERP system.
Identifying cost drivers
"We wanted to know what was driving the costs and why the case fill rate for customers was very low,and we needed to address those issues while we were working on SAP. So we decided to use Demand Solutions and Microsoft Access to create an interim type of ERP system.
"Arla inherited from National Cheese four systems that did not really interface well with each other,"explains Provost. "Old and largely outdated, they don"perform their own functions very well and they certainly didn't integrate with the other systems usefully."
For National Cheese, it was not a huge problem--the company was smaller and things could be done manually and they had staff who did not have any computer experience with systems--they were comfortable with manual processes and Excel spreadsheets. However for Arla, integrating two companies and creating a large, well-run operation running on all these systems is an ongoing challenge.
To Provost, a veteran of SAP and Oracle ERP implementations plus a number of Demand Solutions projects, this looked like a disaster in the making. Moving directly from manual processes to a complex SAP system was too big a leap, especially because SAP requires a level of process sophistication and data integrity which Arla Canada was just not yet ready to provide. The Canadian company needed to develop a demonstrated capability in software implementations, and in managing a complex operation based on data, process discipline,and sophisticated planning systems. This implementation would give them that opportunity, and provide real benefits at the same time.
In ten days the company agreed to license Demand Solutions, and in another 19 days Provost had Demand Solutions up and running for a total cost of $150,000."This was a very rapid implementation,"says Marvin
Lebold, Customer Account Manager, at Demand Solutions Canada in Toronto. "They clearly needed it and we all worked to gether to make it happen. They have steadily improved their forecasting and inventory
Round-the-clock team effort
"Marvin didn't see his wife much during the implementation," says Provost. "We had team members such as Rey Valdeavilla, our Supply Chain Planning Manager who has extensive DS experience, and Jay Byrd our SC Planning Supervisor, who worked non-stop.We also had tremendous co-operation from the Production and IT infrastructure staff.
"Demand Solutions provided three resources, Marvin Lebold, who managed the project and supported process design and training, Tom Becke who managed the Production processes, and Diana Bastos who oversaw the technical elements of the implementation. "Marvin and his team trained our staff, supported process development, and oversaw the technical elements of the implementation.We called Marvin, our DS Project Manager, first thing in the morning and late at night and even on the weekends,but he was always helpful."
The company faced major changes in the information systems it did have running, and the team had to implement Demand Solutions to bring some discipline to forecasting, inventory management, and production scheduling.
In reviewing Excel spreadsheets where key data had been stored, Demand Solutions and Provost’s team discovered extensive data problems. For example, the company had no single system with a single vendor number; it had no electronic purchase order system.Sometimes it used a number for a customer in Quebec and the same number for another customer in British Columbia. Because Demand Solutions is more flexible than SAP, it proved an excellent way to migrate to an electronic system with cleansed and uniform data.
“If you go forward each and every day, in a month you have created real value,” says Jack Gow, Sales Manager at Demand Solutions Canada.
Our forecasting has improved over 12 percent and we are seeing steady improvement in case fill rates over the last five months since implementation.
Working with Richard Ding of Intelliwaves Inc.,Arla used Access to create the whole front end of an ERP system, such as bill of material, purchasing processes, firm planned order and planned receipts.Access also acted as a data regulator, checking the incoming data which could be slightly different from each region, and transforming it into the format that Demand Solutions needed. They also used Access to build a date code tracking system and an interim front end to a new Warehouse Management System (WMS) system they are rolling out to support SAP. Access linked all the systems into something resembling an ERP system bridge using Visual Basic to design a process flow.
Steady improvement continues
“With Demand Solutions we have been able to get our planning in place and implement nationalforecasting for the first time,”says Provost. “Our forecasting has improved over 12 percent and we are seeing steady improvement in case fill rates over the last five months since implementation.”
Arla is feeding data on 5,000 customers and 950 independent and 280 dependent SKUs into the system.On the inventory side, the system is working across three manufacturing plants and three distribution centers, leading to more than 300,000 separate records in the Demand Solutions database.
The system presents the information at four different levels to support a unified demand planning process, linking the sales force and the supply chain. DS FM allows Arla to keep all the information synchronized. Item/customer/ship-to data links the forecasts to the individual outlets, explains Lebold. “a lot of the grocery industry, they do direct store delivery. Arla wanted data at that level to determine what they would ship, where, and when.”
Demand Solutions also tracks at the store banner level for major accounts. So if a company operates stores under several different brands, such as a full service grocery and a no-frills chain, Arla’s sales force can see the sales performance and forecasted levels directly in Demand Solutions. This allows tight integration between the sales effort and supply chain planning, which leads to better customer service.
In addition, the company serves the independent grocery and convenience store markets, as well as food service distributors. A regional sales person can look at the information for his customers and see market penetration, and change the forecast if he adds a major new customer. As the information is offered both at the aggregate level and store level, a alesman looking at a spike can drill down to see exactly where it is happening and make a few calls to determine whether there was a special promotion or other merchandising actions which required an increase in supply.
Collaborating with sales
Arla has developed a collaborative approach,incorporating information from Demand Solutions and providing it to the sales force. They add their market intelligence, which then is fed back to DS FM. The collaboration was designed to pick up changes such as a sales promotion, a chain store’s adding an item from Arla which it hasn’t previously carried or even a store’s decision to put Arla products into an aisle-end display.
“This gives the sales force the ability to talk to the office about what they are doing with their key customers, ”explains Gow.
Provost and the forecasting and inventory management team at Arla are taking advantage of all Demand Solutions’metrics to monitor improvements in forecasting and collaboration and identify any areas that need improvement.The company is on track to reduce obsolescence by hundreds of thousands of dollars annually through its integration of Demand Solutions Forecast Management with DS RP and DS RC, the inventory management and production scheduling modules. By integrating these systems, a alesman’s information that a retail chain is planning a major promotion can flow through to the factory and allowing it to adjust that day’s production plan--real results in 24 hours. This now happens through strong process and data flows, a big change from the emails and urgent phone calls which marked the previous environment.
“This gets away from fire fighting and brings in a disciplined control process,”says Lebold. “With Demand Solutions, the company has gone from people ordering what they felt was needed to a quality forecast with parameters for safety stock and lead times to create system-driven management of inventory which has reduced the disposal of obsolescent inventory.”
For an organization which had relied on manual processes, installation of Demand Solutions has required a massive educational and training process to explain how planning and forecasting and what effective programs require in data and organizational processes.
For instance, now the bill of material provides vital information on ingredients feeding into Arla products, such as showing the semi-finished goods that go into finished goods.
“We had to develop a complete planning process, including how to track materials,” says Provost.” We have also instituted a weekly sales and operations planning process because there is so much change going on in the organization. We have created a whole team around communications, policies, and procedures.”
Now the case fill rate is running six percent higher than before the implementation. As Arla gains experience with the system, this metric should only continue to improve, leading to happier customers. Demand Solutions has provided a base for continuous improvement, as different aspects of purchasing and planning are integrated into the system.”Chris and his team at Arla have shown what experienced Demand Solutions specialists can achieve in a short time, and at a relatively low cost with immediate ROI,”says Gow. “Linking the forecasting and production systems in a few weeks has been a major accomplishment. They are using Demand Solutions at the center of a complex nation-wide Canadian business, and achieving improvements in case fill rates, inventory control, and obsolescence reduction that will increase Arla’s performance.”DS[@more@]
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