Integration of supply chain with demand planning-Tropicana's journey

Geome Reeder; Tim Rowell

The ,.ournal of Business Forecasting Methods & Systems; Fall 200 I; 20, 3; ABI/INFORM Research
pg. 3
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INTEGRATION OF SUPPLY CHAIN WITH
DEMAND PLANNING - TROPICANA'S
JOURNEY
By George Reeder and Tim Rowell
The key to success is not rhe most
accurate forecast or world class
manufacturing but how integrated
is supply chain with demand
planning describes how
Tropicana is moving in that direction
... traditional financial forecasting
is being replaced with SKU/DC level
operational forecasting.
M
st organizations have either
egun or will soon begin the
dysscy -that wiH -move them
toward Supply Chain Planning that is fully
integrated with Demand Planning. Like
others, Tropicana has begun to move down
this path with some success, but many
greater opportunities still lie ahead.
Everyone always wants more .
Consumers want more convenience and
better value; customers want new products
and more services; employees want bigger
raises and more benefits; shareholders want
a betterretum. As businessesbecome firmly
entrenched in the 21" century. the mantra
of "wanting more" has turned into
"demanding more"! Perhaps a new way of
defining Demand Management would be
the art and science of managing a business
successfully to meet all of these incredible
demands! Who said life would be easier
this century?
FORECASTING IS JUST THE
BEGINNING
In the early 1990's, firms recognized
the need to improve the accuracy of
forecasting business information required
to manage business successfully. This is
especially important to Tropicana, as our
primary products are perishable, with a
relatively short shelfl if e. Due to aggressive
growth, we were faced with significant
warehousing, distribution and manufac-
turing constraints. In order to improve the
accuracy of our planning processes, the
logistics organization took over respon-
sibility for "short-term" forecasting from
finance. As Tropic ana's operations
environment grew more complex - cost
GEORGE REEDER
Mr. Reeder is currently working as
a Demand Planning/Supply Chain
Consultant with SCT. Prior to that, he
worked as a Manager of Logistics
Development for Tropicana. He is API CS
certified CPIM, and has spoken at
numerous IBF Forecasting Conferences.
In 2000, he was the Chairperson for the
JBF's first Supply Chain Forecasting
Conference.
THE JOURNAL OF BUSINESS FORECASTING, FALL 2001
focused and constrained- the need for an
increased level of sophistication became
apparent. We needed a more direct focus
on individual SKU/DC level forecasting
rather than the traditional financial or
"Equivalent Case" forecasts. This meant
crossing the boundaries from traditional
demand planning emphasis to supply chain
requirements.
We were determined to develop new
processes and identify and design new
TIM ROWELL
Mr. Rowell is curtently a Manager
of Production and Inventory Planning
at Tropicana. He has worked in
Tropicana 's Supply Chain Management
on other assignments including
reengineering the forecasting process and
leading the design phase of a Demand
Planning Project. He has been an active
member of the IBF and has spoken at
multiple conferences.
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tools to support the more sophisticated and
demanding business environment. We
recognized this back at corporate
headquarters. But, we did not bave access
to all of the information necessary to
develop accurate and detailed forecasts.
So, a team concept was developed. We
would lead and administer the process from
corporate headquarters, but the actual
forecast numbers for key accounts and key
product groups would be provided' by the
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regional or district sales offices. The idea
made sense, everyone thought it was great
but none of the individuals from the sales
organization were knocldng down our door
saying that they had a lifelong dream to
become a part-time sales forecaster. No
one called or asked how they could help.
So, as was so often the case in the early
days, a reluctant "volunteer" was identified
in each sales office to provide support. Of
course, these new responsibilities were in
addition to everything else they were doing.
So, we had some very real concerns about
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'' ciiAR.-F i ., . "' .
AVERAGE WE:EKL)' F(n'mcAST ERROR
. . . " ...
the attention to detail that our forecasting
process was going to receive.
To address this issue, as well as to
obtain support and understanding
throughout the organization, we put several
programs in place. We set up rewards and
recognition programs for the team
members. (These folks were primarily from
the sales organization, and as such were
very competitive. We tried to use this to
our advantage.) We established and
communicated detailed weekly perfor-
mance metrics. We took every opportunity
to speak to the sales organization to help
them better understand the importance of
forecasting to the bottom line. Once they
began to understand the relationship
between the accuracy of the forecast and
operations' efficiency and the company's
checkbook, the support and focus increased
significantly. Weekly SKU/DC average
error rates were reduced from near 40% to
around 20%. The team had done its job!
_ ...... : . ..__._ .
(See Chart 1)
WHATHAVEYOUDONEFORME
LATELY?
That was then and this is now. Our
world has changed. The business has
grown. Traditional supply chain tradeoffs
that existed in the past are no longer
available for quick and easy gains. As an
exan1ple, companies often would make an
increased investment in inventory to
support higher service levels. Guess what?
Our shareholders won tallow us to do that
today. They want a higher return on
invested capital and world-class customer
service. Something had to give!
There is an often true but humorous
axiom associated with software
implementation projects that goes as
follows: "We can do things three ways:
Good, Fast and Cheap; pick two!" For too
many years, in too many industries that
TilE JOURNAL OF BUSINESS FORECASTING, FALL 2001
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CHART2
DEMAND PLANNING, MASTER PLANNING, SCHEDULING AND EXECUTION
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was the way the supply chain was viewed.
Today, more has changed than just the
political correctness of these terms. Now
we need to deliver with the "Highest
Quality, Quickf.v, and at the Lmvest Total
Cost" with very few exceptions. Meeting
this new axiom is the cost of entry into
today's demanding and dynamic
Master
Produr.tiiHl
Pl:m
Production
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Replenislt-
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marketplace. Excellence in manufacturing.
procurement and distribution alone will
not deliver the expected results to the
bottom line if we are manufacturing,
procuring and distributing the wrong
products.
) marketplace.
actually coined it first but whoever did hit
the money on the head. Major process and
organizational redesign -often a radical
one- is necessary to deliver the superior
supply chain performance required today.
An effective combination of People,
Process and Tools is necessary t o
consistently deliver world-class results.
Unlike the implementation axiom
mentioned above, you can'texcel in one or
two of these and forget the third. All three
must be in place to produce sustainable
results. The focus needs to be on total and
fully integrated Supply Chain Execution,
not just a great forecast or world-class
manufacturing or logistics.
THE BASIS OF AN IMPROVED
PROCESS
IS INTEGRA TED SUPPLY CHAIN
PLANNING THE ANSWER?
A significant burden has been placed
on the Supply Chain Planning Department
in our organization. A frequently repeated
phrase, "In the future, companies and
products won't compete but supply chains
will" is only too true! I have heard this
statement attributed to several different
people and groups. I am not certain who
The framework for our supply chain-
planning project (Chart 2) is the underlying
belief that this process must begin with an
improved demand signal from the
An improved process is based on a
sound understanding of existing processes.
During the Design Phase of our project,
several months were dedicated to
developing and documenting, in detail,
our various supply chain planning
processes.lt was critical that we understood
each process, the inputs and outputs and
where the responsibility for was located in
the organization. Once the processes were
well understood and documented, sessions
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'' JOURNAL.OF BUSINESS FORECASTING, FALL :w01 -'
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were held to analyze our capabilities vis-a-
vis the requirements of the business
organization and entrenched industry Best
Practices. Once completed, we had a sound
understanding of our "As Is" and "To Be"
world.
Key process and responsibility
changes that were identified as part of the
design phase of the Demand Planning
portion of the project included the
followings:
1. A shift to a centralized management of
more sophisticated forecasting models
that better represented the complex
nature of our business.
2. A more efficient process for the fiel<l
sales organization that required focus,
on maintaining and communicating
customer level pricing and promotion
infonnation.
) 3. Developed a field forecast team of
salespeople to focus on exception
management and/or oversight responsi-
bilities rather than on the creation of
forecasts.
4. Master Planning was asked to assume
the responsibility for the allocation of
marketle.vel SKU forecasts.
5. to
the supply chain.
6. Developed key metrics for evaluating
the quality of forecasts.
In addition to the forecasting process
changes, several other new Master Planning
and Scheduling processes were also
modified. With al l this knowledge in hand,
we then developed a plan to implement
new processes, concurrently with the
building and implementation of new tools.
Unfortunately, as often happens in a
} dynamic organization, our implementation
project was ultimately positioned behind a
more urgent project, so we were going to
be delayed for a year. Faced with this
delay, we decided that we should move
forward as aggressively as possible with as
many of the process/responsibility changes
as we possibly could.
STRATEGY WITH CONSTRAINTS
Despite obvious frustration, in order
to make the most of the situation, we
decided on a strategy that would not only
begin the migration to the new processes,
but also establish the groundwork for a
quicker implementation next year. There
were three key parts to this strategy.
First, we started a "development pilot"
using the new application that was to be
installed next year. We actually
implemented the software on a local
computer and used manual interfaces to
begin managing several accounts and
product groups in parallel to the existing
process and tools. This "test" allowed us to
gain significant learning about the new
application, data requirements, and forecast
model development and refinement. With
this knowledge and experience, we would
be able to build and implement the entire
demand-planning project on a fast track
next year.
The second step was to begin the
migration to the new processes and
responsibilities discussed above. To do
this requires completing a series of meetings
with key sales, finance and supply chain
management personnel to update them on
the and changes in responsibility
that we w!li oe this year. In
essence, by completing these design
changes now we will be able to speed up
the implementation of the project scheduled
for next year.
Dealing with change management
issues is always difficult, but through this
phase-in strategy we have the added
"luxury" of working through them slowly
and in a risk adverse manner this year in
anticipation of the roll out scheduled next
year. (See Chart 2)
The final step that we are taking is to
implement key process and responsibility
changes in Master Planning as outlined in
the detailed design phase of the project.
Although we won't have the new
applications installed until next year, we
will have a chance now to work through
many of the issues that a more formal
Master Plan will present to the enterprise.
While these activities do present somewhat
of a distraction this year, we feel confident
Supply Chain Forecasting
Conference
Phoenix AZ
February 25-26, 2002
800.440.0499
that this strategy will ultimately accelerate
the deli very of the final project.
MAKING LEMONS FROM
LEMONADE
Just as our supply chain is becoming
more complex, so is the path that we take
in an effort to improve our supply chain
processes and tools. Projects like thi,; used
to be treated like a "new , system
implementation." Today' s projects are
much more complex, requiring a higher
degree of change management but
ultimately providing greater potential risks
and rewards. It is important to remember to
take advantage of any opportunity that
presents itself, even if the opportunity is
masked as a project delay. We will end up
benefiting in the long run. With this
strategy, we will increase knowledge
transfer; better prepare the organization
for radical changes; and greatly reduce the
risks and rcwor!tassociated with the project.
MID-YEAR PROGRESS REVIEW
Through mid-year '01, we have stayed
true to our strategy with constraints, and
made significant progress toward our end
goal. The "development pilot" was
completed and whatever we learned from
it we documented. The insights gained will
not only significantly reduce the time frame
of future implementation. but also !Jiggered
ideas for improvement we can put in place
today using our current systems. We
received buy-in from key management
personnel and have migrated to the new
centralized forecasting process. The new
Demand Planner positions have been
staffed and we have started to see
improvements in overall forecast accuracy.
Master Planning roles and responsibilities
have been flushed out and internal
candidates have been identified. We are on
track to migrate to a Master Planning
environment by year-end.
t ,,., ., ,. , ,, THE JOURNAL. OF BUSINESS FORECASTING, FALL 2.001 ,
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