dsmagazine - demand & supply planning, demand …€¦ · product seasonality was the diagnosis...

DS Magazine 1

MagazineVOLUME 9 / ISSUE 1 / 2009

DSPeerless Pump

Towers Over theCompetition

Find outhow Peerless

Pump protectsthe tallest building

in the world. Page 5

demandsolutions.com2

as a way to boost their bottom line. In this issue, Demand Solutions customers describe their quest to do just that. Even with 150-day lead times and the U.S. dollar plunging, Encompass Group (page 18) was able to reduce its inventory by 10 percent just by increasing its forecast accuracy. Our customers in Africa are facing similar economic instability. But through increased efficiency in their supply chains, many have been able to offset the double-digit inflation rates and high transportation costs. One such customer is East Africa Breweries Ltd. (page 12). The company reduced its raw material cost and its environmental impact by implementing a returnable bottle program with the help of Demand Solutions. What a great example of supply chain innovation. We are no longer a planet of local economies but rather a true global economy. What happens on one side of the world has a major impact on supply chains on the other side. Labor was once the primary business driver for sourcing decisions, but today companies have to consider a culmination of factors that impact profits including: soaring fuel costs, transportation costs, fluctuating global currencies, obsolescence, product recalls and lead times, to name a few. Companies need to reconsider their planning in the context of the global supply chain. For many, the robust supply chain solution from Demand Solutions is the best. That has been the case for thousands of Demand Solutions customers who have reduced costs with our affordable and easy-to-use planning tools. Those tortillas might just be made in Mexico again, but until then, supply chain management is the best solution to boost bottom lines.

Sincerely,

Bill HarrisonPresident

OPENING Letter

Just when we thought that the supply chain could not become any more complex, fuel and labor

prices skyrocketed. According to CIBC WorldMarkets, the cost of sending a 40-foot container from Shanghai to San Diego is up 150 percent to $5,500 since 2000. Worse yet, that number could soar to $10,000 if oil hits $200 per barrel. Couple these exorbitant transportation costs with the expected annual 10-15 percent increase in China’s wages and the question becomes clear: When will companies bring manufacturing inside their own borders again?

This dilemma resonated for me during a recent trip to Mexico City where I learned that even tortillas are being outsourced to China and then imported back into Mexico. The changes to that business environment have been dramatic. It was not long ago when companies in the United States were outsourcing their manufacturing to Mexico, and now the country is outsourcing its own manufacturing and is focusing instead on distribution. My, how the pendulum has swung! Based on whether companies decide to continue outsourcing to the country with the cheapest labor, the pendulum is bound to swing again. Until then, many are looking to the basics of supply chain management

“Many are looking to the basics of supply chain management as a way to boost their bottom line.”

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Editor: Amanda Conner / 2009

4 DS News

5 Peerless Pump Through increased supply chain planning accuracy with Demand Solutions, the pump �manufacturer was able to double its sales while maintaining its original inventory levels – pumping its profits sky high.

8 Turn Point-of-Sale Data into More SalesDoes ZA*QO*0*EA***LJ*XX mean anything to you? To manufacturers and suppliers, �this point-of-sale data can help predict future sales. Learn how Demand Solutions Retail Planning software can propel Point-of-Sale Management and Vendor-Managed Inventory programs to reduce out-of-stock situations and increase sales.

10 Fetco Home DecorPicture this – a 25 percent reduction in inventory while maintaining 99 percent customer �service levels. Leading picture-frame designer and wholesaler Fetco Home Decor achieved these frame-worthy results when it stopped trying to forecast with spreadsheets and started accurately forecasting with Demand Solutions.

12 East Africa Breweries“I’ll give you two beer bottles for that.” East Africa Breweries’ returnable bottle program has �made beer-bottle bartering common in Kenya. Along with creating an alternate currency for the region with the program, the company has reduced its raw material costs and environmental impact. We can all say cheers or “Afya! Vifijo!” to that! (Learn more Swahili on page 13)

14 Pirtek Replenishing inventory to its franchises has never been easier or more profitable with �Demand Solutions Service Level Optimizer. The specialized functionality has given Pirtek visibility into its inventory in multiple locations and has provided better cash flow management for its franchises.

16 TerumoProduct seasonality was the diagnosis for this medical device manufacturer’s forecasting �ailment, and Demand Solutions was the prescribed treatment. Find out the three most popular months to have surgery and how Terumo was able to reduce its inventory by 36 percent.

18 Encompass GroupProvide an accurate forecast – STAT! Medical apparel and products manufacturer �Encompass Group needed a robust forecasting tool to accurately plan for five-month lead times. Demand Solutions remedied the company’s globalization-induced supply chain challenges by drastically increasing its forecast accuracy.

20 Focus on AfricaBusinesses in Africa offset the global increases in the cost of fuel and labor, swelling �inflation rates and lengthening lead times with an increased focus on supply chain planning.

23 Edward Snell & CoThe oldest family-owned liquor company in South Africa relies on Demand Solutions to �help it through a rough economic time.

TABLE of Contents


DS NewsNew OfficeDavid Begin – Mountain States: David Begin has joined the Demand Management team to focus on the mountain states of Colorado, Utah, Wyoming, Montana and Idaho. Begin brings more than 20 years of experience working in supply chain, technology, and software solutions.

Partner Update Microsoft: Demand Management has fulfilled the requirements for the Microsoft Certified Partner designation with the ISV Competency. Microsoft Dynamics NAV: Our popular Demand Solutions® Forecasting and Inventory products have successfully passed the Software Solution Test for Microsoft Dynamics NAV 5.0 and have met the ISV competency requirements. Microsoft Dynamics GP: The design of a certified and repeatable integration between Demand Solutions and GP is complete and is in the testing process. Check www.demandsolutions.com/partners.asp for the latest information.Tectura: Demand Management has recently partnered with Tectura, one of the largest providers of Microsoft Dynamics® business management software, as both companies offer solutions for the manufacturing industry. Visit www.demandsolutions.com/partners.asp to read the full Microsoft partner case study. RSM McGladrey: Demand Management has formed a partnership RSM McGladrey, the fifth largest accounting and business consulting firm. RSM McGladrey’s dedicated Demand Solutions team will resell Demand Solutions and provide product-level support to new and existing customers in Missouri, Iowa, Kansas and Nebraska.

Product Updates NEW PRODUCT — Demand Solutions® Version 11: Demand Management recently released Version 11 of its Demand Solutions® supply and demand planning software. The new product is a technology platform refresh that has the speed of version 9 with the functionality and performance of version 10. The new platform will be the foundation for future feature introductions. Version 11 has a new user interface for Vista users. Call 1-800-886-3737 to learn more about Version 11 and our new upcoming features!

DS Forecast Management Improvements: Double Exponential Smoothing Algorithm: The new formula captures increases and decreases in linear trends. With this addition, DS Forecast Management now has 24 total formulas to help its customers achieve the best possible forecast.Save Graph Formats: For visual representations of customer demand, DS Forecast Management now saves the following formatting options as part of a customer’s graph display: chart in 3D mode, chart in Z-cluster mode, the option to display the chart series legend box, change the border color of series, change the line width of series and change the line style of series.

DS Requirements Planning Improvements: New Calendar: When planning in months, receipts and customer orders will appear in the actual 445, 454 or 544 month in which they fall. Using a 13-week quarter calendar, the item screen dates will reflect the starting day of the four- or five-week period. Daily Forecasts Now Available: Forecasts generated by the DS Weeks function in DS Forecast Management can now be pushed down into days in DS Requirements Planning and then rolled back up into weeks for ordering purposes.

Version 11 retains the popular functionality introduced in Version 10 including: Scaling: The new functionality is an advanced Bill of Material (BOM) that allows easy creation and manipulation of BOM files. With Scaling, customers can also limit the number of months exploded. Interactive Service Level Optimizer APICS Service Levels: The functionality allows customers to see what industry best practices recommend for their customer service levels. Batch-Mode Database Selection: In order to save customers’ time, batch processes can now be run across multiple databases.DS Weeks New History Types and Spreading Option: Now customers can choose from the following history types: class 1-4, vendor and planner.

AwardsSupply & Demand Chain Executive recognized Demand Management as a top 100 supply chain technology provider. The exclusive award recognizes the top 100 providers of

supply chain technologies that are at the forefront of innovation.

DS News

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Peerless Pump

Peerless Pump has been designing, engineering and manufacturing pumps for more than 80 years.

Although its first pumps were used to irrigate orange groves in California, its pumps today are used for a wide spectrum of applications across the globe. Some of the tallest skyscrapers in the world rely on Peerless Pump for fire protection including the Taipei 101 in Taiwan (currently the tallest at 1,667 feet), the Sears Tower in Chicago and the Empire State Building in New York City. In addition to fire protection, its pumps serve many other industries including agriculture, process manufacturing, and the massive pumps that transport safe drinking water to our cities, to name a few. By increasing forecast accuracy through the use of Demand Solutions, the company has nearly doubled its sales over the past four years while keeping inventory levels constant – allowing Peerless to pump up its profits. Peerless Pump manufactures most of its products at its headquarters in Indianapolis, Indiana and also has operations in Alabama, Texas and California. With each location specializing in different pumps, the company can offer a wide range of products to serve its diverse group of customers. There is no finished goods inventory; Each pump is made-to-order. To increase production and assembly efficiency, Peerless Pump’s inventory consists only of the most common components used in pump production. Prior to Demand Solutions, the company based component stock levels on historical data as it did not have the ability to accurately forecast customer demand. The lack of visibility led to a distorted demand picture that adversely affected profits.

The Turning Point Since implementation in late 2005, Demand Solutions has unclogged the company’s profit pump. Greg Brown, Director of Sales and Operations Planning, remembers feeling slightly skeptical, yet excited when Demand Solutions along with the company’s sales managers mutually predicted a drastic increase in customer demand. Based on this forecast, the company decided to add a global supplier and to make other supply chain improvements to support the expected increase in demand. The company uses two methods to determine customer demand: the Demand Solutions’ forecast and the sales managers’ forecast. Having the dual stream of information allows Brown to identify the possible discrepancies between the information and make better forecasting decisions. He determines the forecast accuracy of the individual methods by comparing their forecasts to actual sales – coincidently, both Demand Solutions and the sales managers have a 14 percent mean absolute percent error. “With the same absolute forecast accuracy percentage error, we knew that the sales managers’ and Demand Solutions’ growth projections were either 100 percent right or 100 percent wrong,” says Brown with a laugh. To Brown’s relief, the projections were accurate and Peerless Pump’s timely preparations proved to be a worthy investment as it helped the company realize its growth ambitions. “Demand Solutions has helped us almost double our business by substantially increasing our forecast accuracy and planning our inventory,” says Brown. “We have not had to increase inventory levels to support the increased business; therefore, our inventory turns have increased from six to nine on this key product line.”

Pumping Up Profits

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Did youknow…Peerless Pumps are used in many well known structures including:

• Taipei 101 (Taiwan)• Sears Tower (Chicago)• Jin Mao Building (Shanghai)• Empire State Building (NYC) • Aon Centre (Chicago)• Bank of America Tower (NYC)• CN Tower (Toronto) • Wynn Hotel (Las Vegas) • Trump International Hotel (Chicago) • Gateway Arch (St. Louis) • Ferrari (Italy) • Panama Canal • Oak Ridge National Lab (Tennessee)• RCA Dome (Indianapolis Colts stadium) • Conseco Fieldhouse (Indiana Pacers arena) • Paul Brown Stadium (Cincinnati Bengals stadium) • Lucas Oil Stadium (new Indianapolis Colts stadium) • Several cruise ships

Its pumps rangein size:

Smallest: 4-inch diameter 20 gallons per minute

Largest: 72-inch diameter 110,000 gallons per minute

6 demandsolutions.com

Peer-fect Process Peerless Pump uses the forecast from Demand Solutions as a basis for its discussions with its sales managers. Because the company previously could not accurately forecast customer demand, the sales force did not have an opportunity to share its valuable insights. Andrew Warrington, Vice President of Business Development, sees the firsthand results of including market intelligence into the forecast and agrees completely with Demand Solutions’ belief that people are smarter than software. “From a sales perspective, Demand Solutions forecasts what is meaningful to us,” says Warrington. “I don’t care how complex the forecasting equations are, if they do not include human instinct and the sales forces’ knowledge, the forecast will not be right. Demand Solutions combines statistics with reality to give us a clear view of customer demand.” Currently, Peerless Pump is in the process of replacing its old ERP system with SAP and is pleased that Demand Solutions is compatible with any ERP system because of its import/export functionality. Brown uses this functionality monthly as he exports the finalized global forecast to the company’s MRP system to drive the master production and procurement schedules.

Easy Flowing Along with the financial benefits Peerless Pump has experienced with Demand Solutions, the planning tool has also facilitated a deeper level of collaboration within the company. The software’s flexibility and ease of use have increased the company‘s planning and decision-making efficiency. “When management develops a new means of how they want to view a forecast report, I don’t need a programmer to reconfigure the forecast level in Demand Solutions,” says Brown. “Within a few minutes, I can create new aggregate levels myself and present the new view.” Peerless Pump’s management also likes Demand Solutions because of the charts and graphs it offers. In the past, Brown would have to print several reports and charts to reference during meetings. Now he uses the actual Demand Solutions program in real time during teleconferences through GoToMeetings, an online service similar to Webex, which gives him the ability to display his screen to everyone in the meeting. The planning tool is intuitive and people who have never seen it can understand what is on the screen, says Brown. Being able to quickly and easily see the forecasts for each market segment and physical territories has encouraged more informed discussions about realistic opportunities and risks.

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“Demand Solutions has helped us almost double our business by substantially increasing our forecast accuracy and planning our inventory,” says Brown. “We have not had to increase inventory levels to support the increased business; therefore, our inventory turns have increased from six to nine on this key product line.”


GS*PD*8177780037*004062766*20001127*1758*000002362*X*004010ST*852*0001XQ*H*20001127N1*ST*CAROLINA*9*0098305550988N4*BATTLEBORO,NC*NC*27809DTM*600*20001127LIN**CB*003210*UA*002590072423***ZZ*2 PO4*1 N9*VN*0000000120ZA*QA*0*EA***LJ*XX\ZA*QN*0*EA***LJ*XXZA*QO*0*EA***LJ*XXZA*QP*0*EA***LJ*XXZA*QS*0*EA***LJ*XXLIN**CB*003277*UA*002590074250***ZZ*0PO4*1N9*VN*0000000120ZA*QA*146*EA***LJ*XXZA*QN*2*EA***LJ*XXZA*QO*0*EA***LJ*XXZA*QP*0*EA***LJ*XXZA*QS*0*EA***LJ*XX

To the PointTransform Point-of-SaleData into More Sales

Most manufacturers and suppliers have access to retailers’ point-of-sale (POS) or 852 data but oftentimes do not put it to use.

Two of the most popular POS business models that leverage it for future planning are POS Management and Vendor-Managed Inventory (VMI). The Demand Solutions Retail Planning software works with both models to transform complex data into valuable information that can ultimately increase profits.

POS Management POS Management is the process by which manufacturers or suppliers assist retailers in product assortment selection, overall space management, negotiating store-level inventory and weekly reorder quantities. POS Management tools, such as DS Retail Planning, can turn mountains of hard-to-sort 852 data into usable information. The software provides store-level assortment planning and replenishment that helps build a mutually profitable relationship between vendors and retailers through collaboration. DS Retail Planning’s calculations provide for perpetual inventory as well as the model, rate-of-sale, and reorder quantities down to the store level. This improves sell-throughs, increases customer service levels and increases inventory turns. Leviton Canada’s Retail Division uses DS Retail Planning for its POS Management to analyze and predict sales trends. “Demand Solutions has become our life-line to the pulse of the retail world,” says Kimberley Allen, Marketing Manager. “By having Demand Solutions as a tool, we have a better understanding of the actual and are able to draw more subjective conclusions from the retail environment from both sides.”


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GS*PD*8177780037*004062766*20001127*1758*000002362*X*004010ST*852*0001XQ*H*20001127N1*ST*CAROLINA*9*0098305550988N4*BATTLEBORO,NC*NC*27809DTM*600*20001127LIN**CB*003210*UA*002590072423***ZZ*2 PO4*1 N9*VN*0000000120ZA*QA*0*EA***LJ*XX\ZA*QN*0*EA***LJ*XXZA*QO*0*EA***LJ*XXZA*QP*0*EA***LJ*XXZA*QS*0*EA***LJ*XXLIN**CB*003277*UA*002590074250***ZZ*0PO4*1N9*VN*0000000120ZA*QA*146*EA***LJ*XXZA*QN*2*EA***LJ*XXZA*QO*0*EA***LJ*XXZA*QP*0*EA***LJ*XXZA*QS*0*EA***LJ*XX

To the PointTransform Point-of-SaleData into More Sales

The Item-Level Planner To help manufacturers and suppliers predict the sales performance of new items, Demand Solutions has released an application called the Item-Level Planner to work with its Retail Planning software. The application creates a lifecycle curve based on a similar item’s historical sales performances or that of an entire product family or category and applies the curve to new items, allowing the user to create a store/SKU-level forecast. On a weekly basis, the Item-Level Planner bridges that forecast into DS Retail Planning to manage store inventory. The application keeps inventory in line with product performance in each store by monitoring the product’s rate of sale. If an item is selling above forecast in some stores and below forecast in other stores, the Item-Level Planner will adjust quantities in DS Retail Planning accordingly. The application also has an interface to Demand Solutions’ replenishment software, making the plan quantities available to influence the distributors’ purchases from their vendors or the manufacturers’ work in progress.

A decade ago, the Vendor-Managed Inventory (VMI) business model shook up the apparel industry as vendors were expected not only to plan the production of their products but also to maintain an agreed-upon inventory level. The excitement over the concept lost its vigor for a period of time but has recently made a come back. So too have dedicated POS tools such as Demand Solutions Retail Planning, as turning POS data into valuable information is just as essential for VMI as it is for POS Management. According to a study conducted by analyst firm AMR Research, the top three technology investments for manufacturers in 2008 are VMI, Sales & Operations Planning (S&OP) and International trade compliance and documentation. Although the early adopters of the concept were in the apparel industry, vendors in the hardlines industry are beginning to use VMI. Beckett Associates, the largest trading and gaming card distribution and merchandising company in North America, for example, is a Demand Solutions customer in the hardlines industry that uses DS Retail Planning to manage its customer programs.

“Supporting POS distribution models can be complex, expensive and outright difficult to get a handle on,” says Ryan Wright, Director of Sales Operations/Supply Chain Management. “The Demand Solutions Retail Planning tool has provided the simplicity and capability to support effective and efficient retail POS programs. Through real-time information and built-in systems that operate off of customer-specific parameters, the Demand Solutions tool has assisted in supporting sales at the individual store level.” Eliminating out-of-stock situations is both the goal and benefit of POS Management and VMI business models. According to a Grocery Manufacturers Association study, 47 percent of out-of-stocks are caused by forecasting and inadequate store ordering. Considering that 31 percent of consumers will go to another store if an item is out of stock, 26 percent will substitute a different brand and nine percent will not purchase anything at all, both the vendors and the retailers have an opportunity to prevent lost sales. With Demand Solutions Retail Planning, manufacturers and suppliers can transform complex POS data into increased sales and profits.

Vendor-Managed Inventory

Benefits of POS Management and VMI

Vendor Benefits • Improve manufacturer sales • Improve internal business processes • Reduce returned stock • Improve decision making in line review meetings • Reduce rush product orders

Retailer Benefits • Reduce out-of-stocks • Increase inventory turns • Increase sales • Improve merchandise assortment

9DS Magazine


When a company begins an implementation of Demand Solutions, one of the first questions that the implementation

consultants ask is: “How would you describe your current forecasting process?” When a consultant posed this seemingly routine question to Katie Ward, Director of Planning and Forecasting at Fetco Home Decor, she replied with a metaphor that symbolized her three-year experience of forecasting with Excel spreadsheets: “I feel like I’m caught between hell and a dartboard!” The phrase resonated with the team because they have heard similar responses, though less animated, from hundreds of other customers who have made the switch from Excel to Demand Solutions. Although the company’s product lines are trendy and fashionable, Ward’s job was anything but glamorous and the Excel-based planning system only made it worse. Fetco Home Decor is a leading designer and wholesaler of fashion frames, albums and wall décor products. Its collections have become a mainstay at Kohl’s, Wal-Mart, Bed Bath & Beyond and hundreds of other department stores, clubs, mass merchants, and more than 2,000 independent shops in the United States. To Ward’s relief, the company chose to implement Demand Solutions Forecast Management (DS FM), Requirements Planning (DS RP) and DS View in 2007. Fetco’s goals were to remedy the three main business issues it experienced with a spreadsheet-based process, and by doing so, increase its advantage in the highly competitive picture-frame market. Above all other factors, Fetco chose Demand Solutions because it needed a flexible and stable system it could rely on. “We were so nervous using the Excel-based system that we second-guessed every piece of data,” says Ward. “There was no telling what numbers were accurate because if you sort Excel wrong once, the whole model could be lost.” Secondly, the company wanted to increase efficiency. This was fairly easy to do considering that in Excel, for example, two people cannot access

Forecasting Framework


DS Magazine 11

a file at the same time. With Demand Solutions, it is no longer necessary to juggle documents back and forth — saving time and sanity, says Ward. The last drawback Fetco sought to fix was its seemingly unmanageable midtier accounts. “With the Excel model, we weren’t spending enough time on midtier accounts so we ended up overbuying inventory in order to maintain customer service levels,” says Ward. “We turned on DS FM and all 15 or so midtier accounts suddenly had robust forecasts for their SKUs. It was exciting because these accounts rarely had solid forecasts before.” Year-one benefits from DS FM have been significant for Fetco, and needless to say, Ward no longer feels caught between hell and a dartboard. Demand Solutions has alleviated the problems the company experienced as a result of planning with spreadsheets and those benefits have translated into a real competitive advantage. Ward says that her jaw has literally dropped at times in response to Demand Solutions’ powerful functionality. “I was in awe when senior-level management asked us to bring our inventory levels down by 25 percent, and we were actually able to do so without affecting our customer service levels because of Demand Solutions.” With rising gas prices and a questionable economy, reducing inventory carrying costs and transportation costs are important for Fetco in order to maintain its status as an industry leader. The 100 percent import business designs its products at its headquarters in Randolph, Massachusetts, and third-party factories in Asia manufacture them. Even with 90-day lead times for all of its products, Fetco has maintained a 99 percent customer service level. Ward says that the

company’s year-two goal with Demand Solutions is to maximize its use of DS RP in order to reduce inventory levels even more while maintaining high customer service levels. Although specific cost savings were not a top objective when implementing Demand Solutions due to the unreliability of Excel, Fetco experienced a full return on investment in less than 12 months. “Katie Ward is a perfectionist, as well as a forecast professional, which may seem to be a contradiction of terms. Her vision for Fetco was not only to successfully lead the company’s Demand Solutions implementation, but also to develop a more effective supply chain,” says Kristi Gieseke, Senior Account Manager for Demand Solutions. “As a former Oliver Wight consultant, I can say that I have observed no one with more tenacity to accomplish a mission. With the Demand Solutions suite as Fetco’s tool and Katie at the helm, her sales and operations planning process is sure to reach Class A standards.” When asked if her job has gotten easier through the use of Demand Solutions, Ward responded with her usual quick and pithy tone, “Are you kidding me? No! But now I’m adding value to the forecast rather than just fumbling through a maze of spreadsheets.”

Fetco Home Decor

“I was in awe when senior-level management asked us to bring our inventory levels down by 25 percent, and we were actually able to do so without affecting our customer service levels because of Demand Solutions.”

TM


East Africa Breweries

A Toast to SupplyChain Success

The company implemented Demand Solutions forecasting, replenishment and manufacturing planning modules. Accurate sales forecasting is essential because beer and other liquor consumption have seasonal trends in East Africa. The forecasting module provides visibility into future customer demand for finished products and also into the percentage of purchased bottles that customers will return. The replenishment module uses the sales forecast from the forecasting module to create a replenishment order plan by applying planning parameters including minimum manufacturing quantities and safety stock levels. EABL then uses the order plan in the Manufacturing Planning module to optimize the utilization of capacity in its four manufacturing plants. Capacity, based on machinery and labor hours, is frequently constrained so optimal capacity management is vital to success. The optimized plan is then uploaded to the company’s SAP ERP system for execution. Implementing an effective and affordable planning tool eradicated the business problems that spreadsheets could not solve. EABL now accomplishes its forecasting and planning with relative ease and with a higher degree of accuracy with Demand Solutions. Apart from generating an accurate forecast of product sales, the first of many additional challenges Demand Solutions helped EABL overcome was forecasting the amount of bottles that will be returned.Previously, EABL had experienced a significant return of empty bottles but could never anticipate an accurate number of them in order to plan for production. Although the Demand Solutions implementation team had not previously faced a situation quite like EABL’s, they set up a test environment to model and prototype the new process. With Demand Solutions, EABL learned that its customers returned, on average, 80 to 90 percent of the bottles it sold. Establishing an accurate returned-bottle forecast has aided EABL to optimize the

W hen an empty crate containing 25 beer bottles is worth 760 Kenyan Shillings ($12/€7), the likelihood of a customer

returning it for credit towards future beer purchases is high. But just how high, East Africa Breweries, Ltd (EABL) could not determine through the use of Excel spreadsheets. The Nairobi-based, Kenyan company operates a returnable bottle program to minimize the expense and environmental harm of importing raw materials for bottle production. Demand Solutions helps EABL accomplish its environmental goals — namely to reduce, reuse and recycle — while increasing profits by not only forecasting the amount of beer it will sell but also now forecasting the amount

of bottles that will be returned. With more than 1,000

employees and annual revenue of roughly 30 billion Kenyan Shillings ($464/€294 million), EABL has the largest share of the beer market in the region and has been awarded the accolade of ‘Most Respected Company in East Africa’ five times

in a row (2000 to 2004) and ‘Most Respected

Manufacturing Company in East Africa’ from 2005 to 2007.

Planning the many facets of the business — breweries, distilleries,

support industries, a large distribution network — with spreadsheets was time

consuming and nerve-racking for the supply chain planning department. East

Africa’s leading branded beverage business chose Demand Solutions because of its trusted

reputation for successful implementations and its ability to provide a rapid return on investment.

DS Magazine 13

on shift patterns that allow production to run nonstop. The constant production makes scheduling maintenance for machinery tricky. EABL uses DS Manufacturing Planning to schedule upgrades and repairs without stalling production. In order to help execute the company’s mandatory four-day -per-month maintenance policy, plant managers actually lock the times into DS Manufacturing Planning to ensure that the repairs occur. So far, Demand Solutions has helped EABL achieve its planning goals of increasing customer demand forecast accuracy, forecasting bottles that will be returned, and optimizing the utilization of manufacturing resources, including the efficient execution of its machine maintenance policy. In the near future, the company aims to reduce and optimize inventory levels through more diligent use of the Demand Solutions replenishment module. “Through employing Demand Solutions, EABL has implemented a formal planning process that it could not achieve amidst the chaos of planning with multiple Excel spreadsheets,” says Chris Usher, Senior Account Manager for Demand Solutions. “As this implementation illustrates, Demand Solutions is flexible enough to meet the needs of complex supply chains, yet it provides enough structural rigor to encourage best-in-class processes that can yield superb results.”

flow of empty bottles during production with lower investment in the purchase of bottles. Along with establishing a method to forecast returned bottles, EABL’s sales forecast accuracy for finished products increased by a full 15 percent. Demand Solutions increased EABL’s forecast accuracy from 70 percent to 80 percent. EABL’s portfolio is made up of 17 diverse brands, which are distributed throughout East Africa, Europe, Canada and the United States. Brand popularity varies by region. The flagship brand Tusker, for example, is a Kenyan icon with high sales in East Africa but with lower sales in other regions. The Demand Solutions forecasting module not only allows a company to determine its best-selling brand per customer and region, but also more importantly identifies its most profitable customers and which business segments project the most growth. The company is able to plan more aggressively now with the ability to forecast by product, brand, customer and region. Another drawback the company experienced while planning with Excel was not being able to determine if a particular brand was underselling. With Demand Solutions, the company can immediately recognize slow-moving items and alert marketing to run promotions before it seriously impacts sales. To keep up with customer demand, EABL has manufacturing facilities operating

I’d like a cold beer [local beer, Tusker] Tafadhali nataka bia [pombe] baridi

Please Tafadhali

Thank you Asante (sana)(very much)

Cheers Afya! Vifijo!

I am thirsty Nina kiu

Excuse me Samahani

How much? Ngapi?

Where is the loo? Wapi choo?

Hello Jambo

Good morning Habari ya asubuhi

Good afternoon Habari ya mchana

Good evening Habari ya jioni

Good night Usiku mwema

How are you? Habari?

Very well Mzuri sana

And you? Na wewe?

Where are Unatoka wapi?you from?

I’m from… Natoka…

Good bye Kwaheri

Kenya’s national language is Swahili. With more than 40 other languages spoken, Swahili unifies the region by allowing Kenya’s diverse population the ability to communicate.

Did youknow…

13DS Magazine


Pirtek

Optimizing Inventory Across a Franchise Network

From the hoses used on drilling rigs in the Australian outback to the air conditioning hoses that keep cars cool, Pirtek Australia

provides an array of fluid transfer solution products and services to assist its diverse group of customers. The company distributes its products, which range from massive hydraulic and industrial hoses to small metal hose fittings, from a central distribution center in Sydney to 84 franchise locations that support a total fleet of 320 mobile service vans throughout the country. To maintain its reputation as one of the most successful franchise businesses in Australia and to provide its franchises with superior inventory and cash flow management, Pirtek chose the Demand Solutions Service Level Optimizer to calculate the franchises’ stock replenishment and to gain visibility into its inventory in multiple locations. Pirtek faces 12-18 week lead times for 95 percent of its products. Its relaxed replenishment process prior to the Service Level Optimizer required each franchise to decide what products to buy and when to buy them. The unstructured method resulted in a poor mix of inventory at most locations, increased transportation costs and volatile customer service levels. “The operational staff at our franchises are skilled tradespeople with a vast knowledge of fluid

“Demand Solutions has provided the most effective supply chain solution for our franchises and customers because

it is fully automated, is refreshed on a daily basis and can be run at anytime of the week or month.”

transfer solutions but with limited understanding of inventory and forecasting systems,” says Ian Kerr, National Supply Chain Manager. The company wanted a more efficient and cost-effective way to replenish its franchise network that was not completely reliant on the franchisees. Pirtek had already implemented Demand Solutions’ forecasting and replenishment modules in 2003 to assist in its central forecasting and inventory management. As such, the company did not have to invest in additional software to achieve its replenishment goals because the Service Level Optimizer is built into the forecasting module. The new model with Demand Solutions has drastically improved the inventory mix at the franchise level through greater focus on their most profitable items, consequently delivering improved cash flow, says Kerr. “The Service Level Optimizer has provided inventory visibility across all of our franchises, and it’s easy for the franchisees to recognize the value,” says Kerr. “Demand Solutions has provided the most effective supply chain solution for our franchises and customers because it is fully automated, is refreshed on a daily basis and can be run at anytime of the week or month.”

DS Magazine 15

defined the parameters of the analysis, the Service Level Optimizer then executed its desired replenishment strategy and applied it to every franchise in order to determine their appropriate stock levels. The new model improved the franchises’ inventory mix by allowing them to focus on their “A” and “B” items. “In reality, the franchises did not have the time to review a forecast for 3,500 line items,” says Yuri Verjoustinsky, General Manager for Demand Solutions Australia. “They did however have a feeling for the stock that they wanted in their warehouses. Thus, the challenge was implementing a sophisticated solution that saved the franchises time while delivering quantifiable cost savings and improvements in cash flow.” The Service Level Optimizer stock replenishment model exceeded Pirtek’s expectations, says Kerr. Currently, the company has 51 out of its 84 franchises using the tool to replenish automatically and hopes to have the remainder set up by the end of 2008. The model has proved to be so efficient for Pirtek’s Australia headquarters that the office has recently taken over the forecasting and planning responsibilities for Pirtek’s South Africa and New Zealand offices.

Everyday, Pirtek products and services touch the lives of every Australian, be it:

• Steam cleaning• Chemical processing• The steerage of ocean liners• Providing steam to fire boilers of steel-producing industries• Transporting wheat and cattle• Powering elevators in high-rise buildings• Exploring for oil and gas• Producing coal and food• Mowing • Earthmoving required to build freeways

Did youknow…The Service Level Optimizer is a piece of functionality in Demand Solutions Forecast Management module that enables enterprises with multiple distribution centers, branches or franchises to easily calculate the optimal stock level.

Benefits include:• Inventory reduction• Increased sales• Improved service levels• Visibility into inventory across multiple locations• Improved mix of stock at each location• Increased return on investment from inventory• Increased efficiency because the model is fully automated

Did youknow…

How it works Demand Solutions first restructured Pirtek’s sales history database to an Item/Franchise level instead of an Item/Distribution Center level. The Service Level Optimizer was then used, on a monthly basis, to calculate the recommended stock holding for each franchise based on its invoiced sales history, ABC analysis and desired customer service level that Pirtek defined as A = 98%, B = 95% and C = 90%.

The key to setting up Pirtek’s safety stock levels was using ABC analysis, a function built within the forecasting module that applies Pareto’s Principle — the 80/20 rule — to set up a categorization matrix. Demand Solutions provides eight ABC fields by Item/Franchise record to facilitate a multidimensional matrix. Once Pirtek

A B CA AA AB ACB BA BB BCC CA CB CC

UNITS

COST

15DS Magazine


Terumo

Getting tothe Heartof Product Seasonality

T erumo Cardiovascular Systems (Terumo CVS) is a global manufacturer and distributor of a wide spectrum of products for the medical industry. The company has more than 1,500 finished good SKUs composed of hardware

such as heart-lung machines, disposables such as blood oxygenators, and a steady flow of custom tubing pack orders. Due to the delicate nature of the industry, products undergo

strict quality testing and sterilization. Terumo CVS’ level of precaution to keep end users safe requires a tedious supply chain.

A single tubing pack used during open-heart surgery, for example, is manufactured in Ashland, Massachusetts then shipped to New York for sterilization. From New York,

the tubing pack travels to Maryland to be incorporated with another component and then packaged. The finished product is then sent to one of the company’s five

distribution centers. From the distribution center, it is finally shipped to a hospital and used on a patient.

With so many product variations and steps in the supply chain, it is easy to understand the challenges inherent in Terumo CVS’ supply and demand planning. The company previously used JD Edward’s

forecasting system, which made tracking the many plants and distribution centers and accounting for the seasonality of its products difficult.

“Believe it or not, even medical products are seasonal,” says Kevin Doughty, Director of Supply Chain Management. “Our three biggest sales months are October, January and March because people avoid having surgery during the holiday season.”

DS Magazine 17

Terumo CVS implemented Demand Solutions Forecast Management (DS FM) and Requirements Planning (DS RP) in 2006 to provide visibility into its multiple plants and distribution centers and to forecast the unique seasonality of its products. Demand Solutions quickly helped the company achieve its main business objectives while pleasantly surprising management with additional, unanticipated benefits. “In one fiscal year, Demand Solutions has saved us $1 million by reducing our inventory by 36 percent,” says Doughty. “We experienced a rapid return on investment just with the inventory reduction, not to mention what we’ve saved in back orders, write-offs and obsolete inventory.” Along with reducing inventory by more than one-third, Demand Solutions has increased Terumo CVS’ inventory turns from 3.1 to 4.1. The company’s fill rates were good before Demand Solutions – 97.5 percent in fiscal year 2006 – but escalated to 99 percent for fiscal year 2007. With an average shelf life of three to five years and little visibility, Terumo CVS’ obsolete inventory was dragging down profits. Unlike most software companies, Demand Solutions develops its planning tools with the underlying philosophy that people are smarter than software. “My favorite functionality in Demand Solutions Requirements Planning (DS RP) is the ability to manage by exception,” says Doughty. “Now that we

“In one fiscal year, Demand Solutions has saved us $1 million by reducing our inventory by 36 percent. We experienced a rapid return on investment just with the inventory reduction, not to mention what

we’ve saved in back orders, write-offs and obsolete inventory.” — Kevin Doughty, Director of Supply Chain Management

“Our biggest sales months are October, January and March because people avoid having surgery during the holiday season.”

Terumo

can use statistical formulas along with our own gut instincts, we can do our jobs better.” The executives at Terumo CVS hold monthly Sales & Operations Planning meetings to make strategic decisions based on the forecasts from Demand Solutions. “Prior to Demand Solutions, I could not defend my forecast reports,” says Doughty. “Now, not only do I trust the reports from Demand Solutions, but the executives do too. Our meetings are much smoother now and we have the reliable information necessary to make top-level decisions.” “Having visibility into the supply chain creates a ripple effect of benefits,” says Dan Baksa, Senior Account Manager for Demand Solutions. “Terumo CVS is an excellent example of a customer that had specific goals in mind when it implemented Demand Solutions and has been pleased with the added benefits of tightening its planning.”


Encompass Group

Scrubbing the Complexity out of the Forecast

company was forecasting with its legacy AS/400 forecasting system with simple calculations of three- and six-month averages. As its supply chain became more complex due to the challenges of globalization, Encompass Group’s quality of customer service began to suffer. Barry Hiett, Senior Director of Inventory Planning and the main user of Demand Solutions at the company, says that serving its customers, which include hospitals, commercial laundries, long-term care facilities and retail, is Encompass Group’s number one priority.

“The increase in lead times alone, not to mention the increase in transportation costs, had put an enormous strain on our supply

chain,” says Hiett. “We could no longer plan with an unsophisticated system as its lack of accuracy was beginning to cost us. We invested in Demand Solutions because of its trusted reputation of increasing forecast accuracy and profits.”

W ith lead times as long as 150 days, Encompass Group turned to Demand Solutions for supply chain planning

assistance. The manufacturer and marketer of reusable textiles, professional apparel, therapeutic support surfaces and disposable medical products wanted a planning tool that could help it reach its immediate as well as long-term business goals. The Demand Solutions team implemented the forecasting module in less than 30 days, and Encompass Group experienced a return on investment in five months.

Within a year of accurately forecasting with Demand Solutions, the company is on track to reach its planning goals through increasing global fill rates by five percent and reducing inventory by 10 percent. Prior to implementing Demand Solutions, the

The Demand Solutions team implemented the forecasting module in less than 30 days, and Encompass Group experienced a return on investment in five months.

DS Magazine 19

“We could no longer plan with an unsophisticated system as its lack of accuracy was beginning to cost us. We invested in Demand Solutions because of its trusted reputation of increasing forecast accuracy and profits.”

Encompass Group

By implementing Demand Solutions and restructuring its planning responsibilities, the company experienced a 10 percent reduction in inventory – allowing inventory turns to increase by 20 percent. Most remarkably, having the right product in the right place at the right time increased Encompass Group’s global fill rates by five percent – allowing the company to provide excellent service to its customers, which is its ultimate goal.

to receive the same from Demand Solutions. “I have received amazing support from my representative and the support department at Demand Solutions,” says Hiett. “When I call customer support with a problem, the representative not only walks me through the solution but also follows up to ensure the issue has been resolved. That’s what I call world-class customer service.” Demand Solutions has enabled Encompass Group to meet its immediate business goals, and Hiett is confident that it will continue to play a vital role in the company’s long-term success. Currently, Encompass Group is leveraging Demand Solutions’ flexibility of importing and exporting data in the implementation of an SAP ERP system and a Sales & Operations Planning process.

Knowing that the slightest problem in its forecasting could cause a five-month headache, Encompass Group restructured its internal forecasting arrangement in order to provide the best possible environment for Demand Solutions. Previously, the same person was responsible for forecasting, planning and purchasing. Such combination of tasks had led to an emotional and biased forecast, according to Hiett. To ensure nothing would get in the way of accuracy, the company segregated the duties among several employees. Encompass Group’s effort to increase forecast accuracy through Demand Solutions has had a domino effect of benefits. By implementing Demand Solutions and restructuring its planning responsibilities, the company experienced a 10 percent reduction

in inventory – allowing inventory turns to increase by 20 percent. Most remarkably, having the right product in the right place at the right time increased Encompass Group’s global fill rates by five percent – allowing the company to provide excellent service to its customers, which is its ultimate goal. Encompass Group and its customers are not the only ones that benefit from Demand Solutions. Through uploading the Demand Solutions forecast into its MRP system, the company can provide better product demand projections to its suppliers in locations such as Pakistan, China, Cambodia, Nicaragua and Mexico. Such collaboration allows the suppliers to manage their own supply chains more effectively. Along with providing excellent service to its customers, Encompass Group is pleased

Demand Excellence, Take Ownership


Focus on Africa

Focus on Africa

gaining supply chain efficiencies to counteract the consequences of the country’s double-digit inflation rate, lengthening lead times and surging food and fuel prices. However, despite its well-established trade logistics industry, Ken Titmuss, President of the Association for Operations Management in South Africa (SAPICS), says that the country’s supply chain and logistics industry is lagging behind international markets in terms of systems and professionals. Two main factors restrict the country’s supply chain performance: a lack of skilled supply chain professionals and the economic shift from a manufacturing- to a distribution-centric market. “The fact is that, globally, knowledge has grown exponentially, and those working in our industries have not kept up with recent developments,” says Titmuss. Because the country is experiencing a shortage of skilled workers, Titmuss advises local businesses to make education a priority and to implement best practices in order to remain competitive in the context of the global supply chain.

Demand Solutions has provided supply chain management solutions and expertise to businesses in South Africa since 1995.

For a region as large and diverse as Africa, the cultures, climates and business opportunities seem to vary by kilometer. South Africa in

particular accounts for almost 45 percent of the gross domestic product of the entire continent. Additionally, South Africa was ranked 24th out of 150 countries for its trade logistics industry by the World Bank’s Logistics Performance Index in 2007 – making it the leading African country in trade logistics and not far behind Singapore (ranked 1st), Japan (ranked 6th) and the United States (ranked 14th).

National accolades aside, businesses in South Africa are faced with more pressure to cut costs than ever before. Executives are focusing on

Demand Solutions increases efficiency in African businesses’ supply and demand planning.

DS Magazine 21

“It only takes the stroke of an accountant’s pen, halfway across the world, to determine that it is cheaper to produce a product elsewhere,” says Titmuss. “There is a real danger that we could quickly find our products being manufactured in China and many South Africans out of work. It has happened more than once recently.” Outsourcing some, if not all, manufacturing to Asia is already a reality for many South African businesses. Not only does the shift take jobs away from South Africans, but it also adds more complexity to the supply chain such as longer lead times and higher transportation costs. These and other supply chain issues pose particular challenges to businesses in South Africa.

A Proven Solution Demand Solutions has provided supply chain management solutions and expertise to businesses in South Africa since 1995. The company’s dedicated, local support team understands the business challenges unique to the country. Their expertise combined with the ease of use and implementation of Demand Solutions have contributed to increased efficiency in local businesses’ supply and demand planning for more than a decade. Notable Demand Solutions customers in South Africa include BP, Kimberly Clark, Ceres Fruit Juices, Parmalat, Spier Wines, and Edward Snell & Co. Ltd (page 23), among others.

Spier Wines’ Competitive Advantage Spier Wines, located in Stellenbosch, South Africa, uses Demand Solutions forecasting and replenishment modules to plan the supply and demand for its annual turnover of 1.6 million cases of wine.

Prior to Demand Solutions, the company was incorporating customer- provided forecasts into its manual Excel spreadsheet-generated forecast. “In this changing environment where many people do not understand how to forecast, we absolutely needed Demand Solutions’ easy-to-use demand planning tool to ensure we were not over or underproducing product,” says Jaco Durand, Logistics Executive. Like many South African businesses, Spier Wines exports a majority of its products. “We export to First World countries and they expect that our planning systems are on par with theirs,” says Durand. “The challenge for businesses in Africa is that our supply chain planning and logistics is not on par with the rest of the world. Thus, Demand Solutions is a huge competitive advantage for us.”

A Success in OtherAfrican Countries Other companies in other parts of Africa are experiencing the benefits of Demand Solutions. Although each country faces a unique set of business challenges, many of the challenges related to supply chain planning are shared. Customers in mid-Africa and northern Africa are oftentimes divisions of global corporations. Leading alcoholic beverage business Diageo, for example, uses Demand Solutions in its Guinness Group enterprises located in Nigeria, Ghana, Kenya and Uganda (refer to page 12 for a case study on East Africa Breweries, Ltd., a Diageo subsidiary). Guinness Ghana Breweries leverages Demand Solutions to help with its supply chain planning processes. The company uses the forecasting, replenishment and manufacturing modules to plan its raw material imports and finished goods for home market and exports.

21DS Magazine


Focus on Africa

Hopefully with more focus on the product’s functionality, we will be able to cut costs even more.”

Africa’s Supply Chain Opportunity With its exceptional levels of functionality combined with ease of use, speed of implementation and low cost of ownership, Demand Solutions is providing a vital efficiency differentiator for many African businesses. Increasing raw material costs combined with extended and more complex supply chains means that demand for Demand Solutions can only continue to grow. As South Africa prepares for its expected half-a-million visitors in 2010 for the Football World Cup, forecasters will be planning the expected uplift in demand into Demand Solutions so businesses can be ready.

“One of the main challenges we face in Ghana is importing large quantities of raw materials such as barley and hops because they cannot be grown locally,” says Kofi Nkrumah, former Logistics Manager and current SAP Project Manager of Guinness Ghana Breweries. “We have to deal with long lead times, which make it difficult to operate a just-in-time business.” Although establishing an efficient supply chain was a goal for Guinness Ghana Breweries before the recent spike in food prices, the company now has an even greater incentive to tighten its planning through the effective use of Demand Solutions. “Prior to Demand Solutions, we kept too much safety stock in order to make sure we had enough beer to meet consumer demand,” says Nkrumah. “Demand Solutions has helped us reduce inventory levels and therefore costs.

L ike many businesses in South Africa, the country’s oldest family-owned liquor company Edward Snell & Co. Ltd. is feeling

an increased pressure to reduce cost in order to offset the inflation rate that has recently climbed into double digits. Demand Solutions spoke to Operations Director Neil Proudfoot on the first day of his two-week safari vacation. “Although I am technically on vacation, I have a meeting with key people in our company about reducing inventory,” says Proudfoot. “Demand Solutions will be the main subject of that conversation.” Increased fuel and food prices have caused businesses around the world to re-evaluate their supply chain management processes. Inventory and customer service levels are top of mind for Edward Snell & Co. Ltd., especially because its high average customer service level of 96 percent comes with a price.

Although the company has full faith in Demand Solutions now, this was not always the case. The decision to implement Demand Solutions forecasting and replenishment modules was initially taken in 2002. The company put the necessary infrastructure in place to extract the data from its somewhat dated legacy IT system that it had previously used for supply and demand planning. Despite the determined efforts of the Warehouse and Distribution Manager at the company’s largest of nine distribution centers, the full potential of the system was never fully realized. After about two years, the interest in the system waned to such an extent that it fell into disuse. It was not until 2004, following the acquisition of another spirit company with a more complex supply chain, that the team realized a dedicated planning tool was necessary. Interest in Demand Solutions was once again rekindled. The Planning Manager, who

had joined the company with the acquisition, took a few months to settle into his new, expanded role and immediately began reconfiguring the software for the new infrastructure and reloading the data. Much time was also spent consulting with the operations staff around the country that relied on the system for its weekly production and inter-branch distribution schedules and also with the regional sales managers, whose forecasting input is vital for the effective functioning of the forecast module. As is often the case with any change, there was some resistance. It quickly dissipated as the staff saw the benefits of Demand Solutions firsthand: It replenished sufficient stock to the right place at the right time. About a year after this re-implementation, another challenge arose in the form of a move from the legacy IT system to the SAP All-in-One suite of software. Fortunately, the adapting of Demand Solutions and the configuring of the data downloads in SAP proved to be one of the least challenging aspects of the conversion, and Demand Solutions was functioning effectively very soon after the cutover. Advantages of the company’s conversion to SAP have been richer data mining from

SAP for Demand Solutions software as well as the ability to upload company-wide distribution plans into SAP from Demand Solutions. With Demand

Solutions running effectively with SAP for more than a year, Edward Snell & Co. Ltd. now relies on the system to plan the production and distribution of two million cases of spirits and wine annually. Demand Solutions awarded the company for its superb efforts with a DS Crystal Ball award for the sub-Saharan Africa region in 2007. “The staff trusts Demand Solutions, and as we have learned before, that is the most important factor in our company’s supply chain success with the planning tool” says Proudfoot.

Edward Snell & Co. Ltd.

On the Rocks

“We are confident that Demand Solutions and its support team in South Africa will help us significantly reduce our costs during this rough time in the economy.” — Neil Proudfoot, Operations Director

“I believe we are in a better position to handle a poor

economy because of Demand Solutions proven ability to

reduce inventory levels.”

Demand Solutions makes tough economic times easier for Edward Snell & Co. Ltd.

1 / 800 886 3737SKYPE: DS.DMI.SKYPEdemandsolutions.com

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