"Forecast error is typically considered to account for something like 90 percent of safety stock. If you plan your supply chain using the forecast to set inventory targets, over a zero-to-28-day horizon, I'd say you'll at a minimum reduce inventory by 10 percent. Looking at actual pilot results in some supply chains, we've actually seen examples much higher than that," Kremblewski says.
Byrne notes that Campbell Soup Co., also using the system, has reduced safety stock by 50 percent on average.
The system is intended to forecast near-term demand over a maximum 13-week period. Among its key benefits is that it not only forecasts aggregated demand, but also discrete demand for any number of days out within the extended period. The improved visibility into demand at this level allows companies to react swiftly to changing market signals. Not only can dollars tied up in inventory reduced. Companies should also see marked improvements in order fill rations, promotional coverage, out-of-date-code product, inventory redeployments and emergency changes in production runs, along with reductions in all the associated warehousing and logistics costs.
Already live in one business segment in western Europe, P&G is on the verge of rolling the RTF system out in another very large segment in the U.S. and Canada, and soon after that to additional business segments in Europe.
United Sugars Gets Sweet On Outsourcing
How do you turn a commodity into a high-value product, balance the disparate requirements of industrial customers with retail markets and accommodate erratic demand patterns for your products with a level of flexibility and responsiveness that makes you a preferred supplier-––all at a competitive price?
United Sugars, a cooperative that is the nation's second largest sugar producer, works closely with a network of 3PL partners to accomplish this trick.
"Ours is a very erratic business. Based on prior history, we might be planning on shipping 20 trucks a day, then suddenly discover we need 10 more. It takes a particular kind of flexibility in warehousing and logistics to handle this sort of uneven flow," observes Ray Smith, facilities and quality systems director for United Sugars.
Logistics partners like Saddle Creek Corp., which handles warehousing and inbound transportation for United Sugars' consumer and industrial granulated packaged products in the Southeast, provide such flexibility in ways that would be difficult to reproduce internally, at least not cost-effectively.
With minimal storage capacity at its plants and no warehouse space of its own, United Sugars' production, especially during its busy harvesting season, must be shipped off daily to 3PL partners like Saddle Creek, who manage inventory and prepare and ship orders for customers.
With its large campus facility, Saddle Creek has sufficient capacity to absorb United Sugars' sharp fluctuations in supply and demand.
"This allows us to keep a tighter hold on inventory than we otherwise could, letting us operate in something approaching a just-in-time fashion," Price notes.
Similarly, Saddle Creek's labor pool, shared across its customer base, can be balanced against different clients' needs.
"We're able to staff for the averages, then shift personnel around to deal with the fluctuations so United Sugars isn't carrying any dead cost," points out Mark Harrell, facilities manager at Saddle Creek's Lakeland, FL, operation.
In addition to handling a mix of product types ranging from 50- and 100-pound bags for industrial customers, to two-, four-, five- and 10-pound bags for the consumer retail market, Saddle Creek deals with a number of individualized customer requirements on its client's behalf like specialized labeling and stamping and other customized services.
In the retail market, private label business multiplies the number of SKUs handled. On the industrial side, product packaging is typically generic but customers often require special handling such as having product packed in trays, or application of custom pallet labels to match the end-user's inventory processes.