Forecasting & Demand Planning

Campbell Soup Company is a $7.9bn leader in the consumer packaged goods industry, producing what can only be described as some of the most widely known brands in the food industry. Pepperidge Farm, Swanson and Prego, all Campbell’s products, are among the lineup of staples found in many homes. And then, of course, there is Campbell’s Soup in the familiar red and white can.

Campbell Soup North America, which markets to the U.S., Mexico and Canada, accounts for more than $5.2bn in revenue. It has 26 plants, co-packers and distribution centers, which produce almost 1,000 products.

Terra Technology, developer of demand sensing and inventory optimization solutions, has been a partner of Campbell’s for years, according to Steve Cortese, director of supply chain infrastructure  at the food industry giant.

Campbell Soup reportedly was the first consumer products company to implement Terra’s Demand Sensing (DS) and Inventory Optimization (IO) solutions. Campbell’s consumer products divisions have been live on DS since 2004, reducing forecast error as much as 50 percent and improving quality of shipments from warehouses and plants from the day the software went live, according to Cortese. DS applies complex pattern recognition algorithms to daily demand information, including channel inventory and retailer data, to create an accurate prediction of demand.

Because of the success of DS, Campbell implemented Multi-Enterprise Inventory Optimization (MIO) in 2005. MIO optimizes inventory across all echelons of the supply chain, from raw materials to warehouses to retailers. By modeling the entire supply chain, MIO generates an inventory strategy that decreases safety stock requirements by 10 percent or more without compromising service levels.

The Terra implementations resulted in a $10m savings in inventory in the first year. Safety stock has decreased 20 percent across the food service business and order fill improved 5 percent, according to Cortese. Unplanned changeovers due to demand declined significantly, increasing manufacturing stability.

In 2007 another division of Campbell Soup, Away From Home, implemented Terra Technology’s solutions. Campbell Away From Home provides end-to-end support to a rapidly growing market that includes restaurants, schools, colleges and universities, health care, convenience stores, vending, and delis. The software has cut short-term forecast error more than 40 percent.

Cortese says that the North American food service business unit had used older Terra solutions—Real-Time Forecasting and Real-Time Inventory—for years. Plans to upgrade to Demand Sensing and Inventory Optimization, however, had to wait until an SAP rollout was complete. “As you can imagine, when you embark on an SAP project, especially for a Fortune 500 company, you keep your environment stable with regard to the rest of your applications. So, we had to stay with the older releases,” Cortese says.

Once that was complete, things changed, and in a big way. First, in March, “We upgraded Campbell USA and installed [Terra] tools for the North American food service organization,” Cortese says. “At Campbell, we produce a fair amount of the North American food service product. And the way our supply chain planning, opportunities, processes, organizations and systems are designed, we didn’t have visibility to that volume nor were we getting the more accurate demand signals or inventory planning capabilities that Terra Technology brings to the table. So it was a win-win for both organizations. We were able to produce more accurate demand signals for Campbell USA, given that we produce 40 to 50 percent of their volume.”

Terra Technology says it offers the first demand sensing solution. DS applies complex pattern recognition algorithms to downstream data to create an accurate prediction of demand. DS updates these daily forecasts every day as more information becomes available. Because the software responds to what is happening in real time, forecast error typically drops by 50 percent or more, according to Terra.

Terra’s Demand Sensing solution is a bolt-on to traditional demand planning systems. The developer says DS is completely compatible with demand planning systems from all major ERP and supply chain vendors, including SAP, JDA/Manugistics and Oracle. Cortese says a Terra team determined how best to make DS work with Campbell’s JDA/Manugistics setup.

Terra says that by modeling the entire supply chain, IO generates an inventory strategy that decreases safety stock requirements by 10 percent or more without compromising service levels.

Cortese says safety stock levels have been lowered by twice that at Campbell’s, but he notes that the reductions he refers to apply only to the food service unit and not to the overall Campbell USA portfolio.

RESOURCE LINK:

Terra Technology, www.terratechnology.com