Small Steps, Big Payoff
Realizing that it could not attain its goals internally, the company turned to Supply Chain Consultants Inc., a software and consulting company based in Wilmington, DE, to improve demand planning and forecasting. SCC first did an assessment of Mother Parkers' supply chain to determine what processes needed to be improved, according to Tom Leonarski, SCC's senior consultant, food industry.
"Mother Parkers faced problems that are typical among manufacturers," says Leonarski. "While every company is unique, most of our clients tell us that they've got too much inventory and are not meeting customer demand. It boils down to a lack of communication within the organization."
Part of the forecasting problem is the number of sources involved in the process. A demand planner may produce a forecast, but it is run by the sales reps, sales managers and plant managers, who all might modify the plan. A statistical analysis of historical data may not take into account outside variables—changes in customer demand, marketing programs—or last minute customer orders, such as Mother Parkers often has for its private-label lines.
"Unlike our branded business, where we were able to schedule a week or two at a time, we are only a day or two out on the private-label lines," says Kappel. "We are very order-driven and every single day at the plant is different, so on Monday, we don't know what we'll be producing on Friday. We've got some great employees who know the coffee business really well and were good at forecasting, but we needed to do a better job in schedule attainment."
SCC helped Mother Parkers optimize its scheduling by taking deliberate and incremental steps at each of its plants. Each step resulted in gains that could be measured and then institutionalized. The first step was to consolidate the data required for day-to-day planning. This was followed by simulation capability that allowed the users to measure the effect of changes to the schedule.
"This step is important because you have multi-layers of movement of product through the network, and it's difficult to figure out the effect of change in one part of the schedule on the overall plan," says Leonarski. "In addition, many companies can make the same product in several plants, so depending upon demand, you may have to offload some of that production to another plant."
The final step was to optimize the scheduling. SCC developed unique scheduling algorithms suited for tightly coupled scheduling problems that Mother Parkers often encounters. Applying these algorithms has provided dramatic improvements in schedule attainment, schedule visibility and stability. Leonarski points out that Mother Parkers did not implement any new software during the process, but was able to develop the scheduling application with an existing package the company already used.
"We don't have to sell software because we can find early improvements without it. If your forecasting is better, you're not making more product than you need, so your inventory goes down. Then you've got capacity to react to one-off orders or orders that are higher than the forecast, so you can react to changes in the marketplace," says Leonarski. "You've got fewer changeovers and less waste—and changes on the line are usually very expensive and time consuming.
"Whenever we start a project we go do an assessment and figure out what the company's pain points are," he adds. "We zero in on areas like demand planning and days of supply and look for 'low-hanging fruit.' We like to attack this in a six-step method and have the savings of each implementation finance the next one."
Early on in the process, Mother Parkers was able to significantly reduce inventory. "With the improved visibility in the schedule, we saved several millions of dollars in inventory reductions. We continue to see the process improving," says Kappel.