For most manufacturers, production scheduling is more of an art than a science. With so many variables—changing consumer demand, seasonality and promotions, to new a few—and information coming from a variety of sources—demand planners, plant managers, sales representatives, etc.—it's hard to believe that any organization can accurately plan more than a day ahead.
But forecasting doesn't have to be a guessing game, as Mother Parkers Tea and Coffee Co., a Canadian-based tea and coffee producer, found out. You may not recognize the name, but chances are you've had a cup of its coffee as Mother Parkers provides private-label blends for many leading grocery and restaurant chains in the United States.
In Canada, the 94-year old company is renowned for its own brands, including Higgins and Burke as well as its namesake, Mother Parkers Coffee and Mother Parkers Tea. It also produces private-label brands for a number of lines. The company operates three manufacturing facilities—separate coffee and tea plants in Mississauga and Ajax, both in the greater Toronto area, and another coffee plant in Fort Worth, TX.
The two coffee plants produce finished product at a rate of more than 50 million tons per year, making Mother Parkers the largest privately held coffee and tea manufacturer in North America.
Scheduling these products on shared facilities is a challenge because of the variety—some 3,500 SKUs—and the need to respond quickly to changing customer demand.
"In the Mississauga plant, we do everything from very large runs for our biggest customers to make-to-order runs that can be as little as 30 cases," says Will Kappel, the company's vice president of supply chain. "We bring in un-roasted green coffee in burlap sacks from around the world to produce about 100 different blends. We have to schedule the run, roast, grind, de-gas, blend and package the product. Sounds very easy—just follow the sequence and you're set."
But coffee processing is not that simple, Kappel says. In fact, it's a complex process. "The cycle times on each product can be very different. We can have a whole bean coffee that has a very fast cycle time through the plant, say 20 minutes from roasting to packaging. But in another situation, that same roasted product may not be packed for 24 hours.
"We've got five roasters and hundreds of tanks, and every single lot of coffee is uniquely produced and running through the facility at a different rate. We have to monitor quality control because of tempering and degassing times, which complicates the process. Any change in production schedule can have a large impact on throughput because we have multi-layers of movement of product through our network," he says.
How to manage complexity? A few years ago, Mother Parkers launched an initiative to improve schedule attainment, reduce costs and inventory levels, while maintaining customer service. The company boasts a case fill rate of 99.3 percent plus, so its high service level gave it a competitive advantage, but at a cost.
"Internally, we had to maintain that service painfully," says Kappel. "Our objective was to find a scheduling solution that allowed us to forecast better, combine like blends so that our packing lines were producing on a more consistent basis, and combine and sequence through the roasters, so that the roaster would be operating on a continuous basis."
In addition, the company wanted to be able to continue to grow its business.
"If you're in the branded business, you create marketing programs to grow your business and find new forms of distribution, but in the private-label business, your business grows as fast as your customers can grow it," says Kappel. "We can't grow any faster than our current customers.
"Last year we added a major convenience store customer and manage two-thirds of their volume, and we took over that business seamlessly. And we recently got all of our plants organic certified because we see huge growth in organic products. So we're trying to better manage all of this complexity, and do it more cost-effectively."
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.
In addition, the Mother Parkers continues to provide the highest levels of service to its customers.
SCC's six steps are:
- Analyzing the demand stream—looking at historical patterns, demand variations among different products lines, seasonality and order sizes.
- Creating an inventory profile—identifying the relevant inventory attributes such as product, package, production date, amount and warehouse and manufacturing locations.
- Creating a demand planning process that can be routinely executed—deciding on a level of aggregation that generates a statistical forecast without losing too much detail and identifying the persons or functions that contribute changes to the demand plan.
- Create a model to balance supply with demand—constraints and cost factors such as manufacturing facilities, transportation resources, contract facilities and other resources can be balanced with revenue or margin optimization to find the balance point in keeping with business objectives.
- Implement an ongoing sales and operations planning process—far more than a "monthly meeting," S&OP is the way effective supply chains are managed on a daily basis, providing a disciplined way of responding to change while minimizing disruption in the day-to-day operations.
- Building an ATP (available to promise) capability—in this final step, companies build additional quantitative and communications structures to provide specific calculations and reporting procedures for your most common promise transactions.