News

Ventura Foods Boosts Demand Forecasts

by Brian Albright

Frontline Solutions

May 3, 2005

Faced with an evolving business model and growing customer base, edible oils manufacturer Ventura Foods needed to find a new approach to demand forecasting to help improve asset utilization and increase existing system capacity.

The company has increased its near-term forecast accuracy by 60% with new demand forecasting software from Terra Technology. The Real-Time Forecasting (RTF) system has helped the manufacturer lower inventory levels, manage transportation costs and reduce forecast error.

Ventura manufactures edible oils, shortenings, dressings, margarine, sauces, and flavor bases at 12 locations around the country. The company uses the Terra system to generate forecasts for the more than 2 billion pounds of oil it buys every year.

"Decreasing forecast error is particularly important at Ventura Foods because accurate forecasting yields lower inventory holdings and decreased transportation costs," said Larry Felhauer, vice president of supply chain at Ventura. "When forecast error is high, we are forced to expedite shipments, and expedited shipping costs can be as much as two and one-half times higher than normal transportation costs."

Ventura turned to Terra to help the company align resources and increase capacity because the nature of its business was rapidly changing. In the past, Ventura operated in a mostly make-to-order mode. Now, with more channels and a more diverse product mix, the company could no longer rely solely on historical sales patterns to create a forecast.

"They were really running just what they need in the next week or so," said Robert Byrne, president and CEO of Terra.

"As we've grown, finding opportunities to increase the utilization of our existing asset base has become very important," said Wayne Olson, director of logistics at Ventura Foods. "For many of our new product channels, we're moving to a make-to-stock model, and we needed to address this through new planning tools. We're changing into a more diverse and dynamic type of business, and the old rules for demand projection don't hold."

The Terra forecasting solution acts as an add-on to existing supply chain software, in this case, a system from Demand Solutions.

"We wanted to couple the Terra system with Demand Solutions, which provides more of a statistical/historical forecast. Terra looks at that data, plus the order patterns, and gives us a more refined forecast," Olson said.

Implementation took between three and four months. "It could have gone faster, but we were very deliberate in our approach," Olson said. A single point person from Ventura's IT department interfaced with a single contact at Terra during the project. "We funneled everything through those two individuals, so we could avoid any miscommunications."

The system helped Ventura improve weekly forecast accuracy from 49% to 79% after going live in November 2004. The company has since upgraded to a new version of the software, and plans on implementing Terra's safety stock solution as well.

http://www.terratechnology.com/