Transcript Retailer strategies to improve promotional forecasting

Case study – December 2011
© IGD 2011
Implementing VMI is one of Sainsbury’s key
priorities for 2012
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Building trusting partnerships is a big part of Sainsbury's supply
chain strategy
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This means that “sharing information, being clear about what will
be shared in an open and honest manner is an essential part of
our strategy” (Source: Sainsbury's supply chain grocery supplier conference, September 2011)
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Phase I of Sainsbury’s Vendor Managed Inventory initiative was
implementing a trial with CCE, and this meant that CCE had to
fulfil the following criteria:
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SKU count in the mid range
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Complex order generation and fulfilment
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Complex network
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‘Good’ to ‘Better’ Supplier performance
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Proven experience & skill
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Strong record of collaboration across the teams
Source: IGD Research, Sainsbury’s, 2011
© IGD 2011
Key enablers for implementing VMI
Well established relationships,
e.g. an already established joint
business planning approach
Reliable processes for data
exchange between the vendor and
customer organisations
Good understanding of demand
and the drivers of demand
This case study will provide
you an overview of how
Coca Cola Enterprises and
Sainsbury’s worked together
to build these enablers, and
delivered results for their
businesses
Awareness of its role in delivering
other improvements such as
inventory and lead time reduction
© IGD 2011
What is vendor managed inventory (VMI)?
There are different techniques for managing stock in FMCG supply chains. It can be managed
jointly by suppliers and retailers.
Efficient supply chains rely on data passing along the chain, and one technique to use that
data to increase efficiency is vendor or co-managed inventory. In this model the retailer’s
stock levels are managed by the supplier.
The retailer (or
customer) provides
data on demand and
stock levels, which
the supplier uses to
determine
replenishment
quantities and times
The supplier (or
vendor) agrees to
maintain a fixed
inventory level in the
retailer’s distribution
centre, usually
within fairly tight
limits, but can plan
and manage
ordering and delivery
to maximise
efficiencies
Source: SAP
Source: IGD Supply Chain Analysis, 2011
© IGD 2011
Aims and objectives for the VMI initiative
Although the CCE business with Sainsbury's was doing well, the team wanted to “do more,
do it better and do it faster to better manage service and cost”. This meant that systems
and order management processes had to be fit-for-purpose helped by clear visibility of
sales, stocks and service level.
Performance versus target
Before VMI (January 2011)
Supplier Service
CCE
Depot Service
Depot
Availability
Store
Stockholding
Source: IGD Research, 2011
© IGD 2011
The two networks
Source: IGD Research, 2011
© IGD 2011
Project scope definition and progress
Reporting and
review process
agreement
Key
performance
measures,
product lines
and locations
agreed
The role of a VMI manager what you need to think about
Identify a ‘high
performing
individual’ in
CCE as the
VMI manager
for Sainsbury’s
 Pick a high performer – one who
has a track record for delivering
results in your business
 Ensure he or she has the
experience of working in a
customer facing role and a good
knowledge of the supply chain
function
Confidentiality
agreement
signed
Regular
reviews
Go-live
3-month
training in
Sainsbury’s
systems and
work
shadowing
 Must-have skills: ability to manage
data, engage and communicate
well with people, good listener,
objective and impartial, ability to
see things through and a passion
for getting things done
 Personality traits essential: selfsufficient, mentally resilient and a
self-starter
© IGD 2011
What does a VMI manager’s day look like?
1.
Review availability: depot,
supplier, promotional
2.
Check forecasting variances
3.
1.
SKU level availability
investigation / sub
cat
2.
Today’s depot stocks
and sales
3.
Check range
Investigate top 20
availability failures
1.
Publish shared metrics for the
week, month and quarter to
CCE and Sainsbury’s
2.
Review supply chain
development initiatives
3.
Non issuing stock
4.
Review overall depot stock
4.
Review CCE promotions
5.
Investigate all credits –
projected, depot,
consecutive
5.
Add stocks
6.
New product development
© IGD 2011
The VMI manager plays a key role in improving
visibility of demand
Order generation
Order processing
Fulfilment
• A more forensic
understanding of how
the forecast is generated,
i.e. ‘what goes in to the
forecast’
• Opportunity to ‘tweak’
orders before it is
‘pushed’ out to better
reflect any supply or
network constraints
• Better understanding of
how the depot network
works
• Opportunity to challenge
forecast and make
recommendations for
improvement
• Increased visibility of
demand to optimise
capacity utilisation
• Greater visibility of
forward loads offering
opportunity to better
manage haulier, depot
and labour capacity
© IGD 2011
Practices that delivered some early wins in the
CCE trial: some examples
Supplier service
level
Depot service level
Availability
• Weekly and daily
tracking of
performance
• Weekly and daily
tracking of
performance
• Maintain strong
performance
during ‘plinth
change-over’
• Root cause
analysis of supply
shortages
• Focus on future
issues using
projected credits
on a daily basis
• Support by
amending loads
and creating loads
where necessary
• Focus on EDI nontransmission and
haulier
performance
Stockholding
• Identify causes for
stock build, e.g.
promo packs,
‘hands-off’ EDI
trial
• Use of ‘overstocks
tracker’ by SKU, to
focus on ideal
stocks
• Track on-shelf
availability by
format
• Continued focus on weekly updates to colleagues in both businesses alongside on-going tracking of key
stores identified through joint planning process
• Ensure there is continuity in business planning by training additional colleagues where necessary
• Invest in continued improvement in the VMI project work, e.g. lead time changes, haulier performance, etc.
© IGD 2011
Challenges must be overcome
A VMI initiative means that the supplier needs to invest resource in the project. How
did CCE manage this challenge?
Considering the benefits of improved supply chain visibility from having a VMI manager
for Sainsbury’s and recognising the implications of resource requirement at Sainsbury’s
head office (Holborn), CCE worked together to plan this and build the business case in a
more robust way.
As a supplier committing to implement VMI, there was a need for
visibility and transparency in transaction data. How did CCE ensure
this was an integral part of the process?
CCE signed a confidentiality agreement with Sainsbury’s and ensured
senior stakeholder buy-in for the project. This helped in planning,
managing and ensuring ownership for a successful pilot.
Understanding complex retailer systems and processes in a new environment can be
daunting. How did CCE overcome this barrier?
Recruiting a high performer, ensuring that the training is planned at least six months
ahead and tying it in with Sainsbury’s quarterly programme of supplier courses helped,
as did picking a candidate with prior experience in complex ordering systems.
© IGD 2011
Critical success factors
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Senior management commitment and
sponsorship
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Belief that a VMI initiative requires
investment, both from the retailer and the
supplier
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Defining the right scope; agreeing the
metrics, reporting and regular reviews are
absolutely essential
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Using the best people and giving them
authority to operate alongside equipping
them with training not just before, but
during and after
Finally, using the collective experience to
make bold decisions on trying new things, is
just as important
“The success of VMI has been built on trust. The trust between
both our businesses has led to us moving the dial in terms of
our partnership and also improving our joint performance
metrics. We both invested in the VMI programme and now we
are both winning“
Andrew Atherton
Senior Supply Manager, Sainsbury’s
“Andy and I were committed to finding ways to improve our
service and cost together. VMI has been successful because we
had a great plan, signed off at the top with great training and
support from the JS team“
Alun Ferguson
Senior Manager Customer Logistics, CCE
© IGD 2011
Results
Performance versus target
Before VMI (January 2011)
Performance versus previous
After VMI (October 2011)
Supplier Service
+0.94%
Depot Service
+0.50%
Availability
-0.08%
Stockholding
+0.25wk
Following the trial, the teams at CCE and Sainsbury’s expect to review the scope, with an
aim to extend it to store replenishment systems as well as the volumes pertaining to the
convenience store format. The performance standards for 2012 will be ‘raised’ in order to
accelerate the definition of ‘ideal’ within both businesses.
Source: IGD Research, CCE, 2011
© IGD 2011
For further insight
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IGD would like to acknowledge Sainsbury’s and Coca-Cola
Enterprises in the development of this case study
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For more case studies on how retailers and suppliers are
implementing improvement initiatives, please visit the case
study section on Supply Chain Analysis
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For insight on Sainsbury’s logistics strategy and related
insight, please click here
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For any other information, please email Nick Downing at
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© IGD 2011