Manufacturing Executive - January/February 2009 - (Page 33) Let’s use the demand to shape our production.’ ” The company clearly needed to change. Its overall financial performance was in a dive — the €679 million in revenue for the fiscal year ended Feb. 29, 2008, marked an 8% tumble from the prior year, as pre-tax profits before exceptional items freefell 40% to €110 million. And as Murphy recalls, “We were near the bottom of the league” in customer relations, scoring low on delivery times and order accuracy. With performance diving, Murphy proposed his idea: Cut the number of warehouses around Ireland and the United Kingdom that C&C was using to stage shipments of kegs and bottles of cider to supermarkets and pubs, such as Tesco, ASDA, and Marston’s. A perplexed C&C executive team wondered how eliminating warehouses close to customers would help. “There were a lot of blank faces,” Murphy recalls. “They said, ‘How’s that? How are we going to serve our customers?’ ” Murphy convinced them that centralizing distribution from the company’s factory in Clonmel, Ireland, north of Cork, would cut days out of the time it takes to get pallets of cider to customers. Much of the improvement would come from eliminating the inefficient communications that bogged down customer relations as orders and enquiries bounced around from warehouse to office. He was right. After the company shut down five contracted warehouses in Ireland and one in the United Kingdom in 2007, it didn’t take long to see the results. Raw material and packaging costs plunged 37%, cost per case dropped 19%, and inventory declined 11%. The improvements have not yet shown up in broader financial results — revenue declined 13.2% in the six months ended Aug. 31 — but the results seem to be pointing C&C in the right direction. Murphy says the changes in cider production will save the company about €7 million this year. The company is focusing first on the cider side of the business because it moves more product than does the spirits division. Customer relations are also improving, as cider delivery times dropped like a shot to two days from about 10 days. The improvements have relied on a couple of technological underpinnings, including a basic transition to EDI connections with large customers that had been using an unwieldy combination of phones, faxes, and e-mail. “You had the complexities of all the communication links in between,” Murphy says. And then there was the fancy stuff. Cutting out all of its forecasting “C&C’s history of The figures had been abysmal. were wildly wrong both on the upside and the downside.“ external warehousing meant that C&C would have to get much better at forecasting demand. But C&C’s history of forecasting had been abysmal. “The figures were wildly wrong both on the upside and the downside,’’ says Shane Hughes, C&C’s IT and continuous improvement director, who came onboard in mid-2007 from Coca Cola. “One of the first things I did when I joined was identify this as a significant pain point for the business.” Over-forecasting had been costing the company in inventory and cut-rate stock sell-offs. And under-forecasting “probably cost us more,” forcing the company to scramble into costly rush production, Hughes says. To fix the problem, C&C installed a €160,000 demand forecasting software package from Atlanta-based Logility. The company completed the implementation in July, and Hughes expects it to pay for itself within a year of operation and to then yield “multiples” in savings. The software predicts demand by analyzing past trends based on an array of variables, such as product, sales region, sales representatives, and customers. It also allows C&C to factor in current conditions, such as economic realities and weather. “There are no emotions associated with it,” Hughes says, noting that human forecasts tend to hold back bad news or get carried away with optimism. “It’s already brought a step change in forecast accuracy.” The software has also led to cultural changes. C&C still requires sales staff to make forecasts, but the company now bases bonuses, in part, on forecast accuracy. Also, the software has enabled C&C to redefine the jobs of two former production planners, who used to determine factory runs based on information fed by the sales team. The company now calls the two individuals “demand planners.” Hughes says, “They manage Logility and are responsible for creating the production plan that drives the factory.” Does the demand information feed an MES system that controls machines? No, Hughes says, the two demand planners simply take data from Logility and put it into a Microsoft Excel spreadsheet to organize production runs. The move to demand-based production has led to subsequent benefits. Because customer relations have risen from the depths — “now we’re at the top,” Murphy claims — customers are more willingly sharing point-of-sale data with C&C. Or, as another cliché goes, one good turn has deserved another. Whether these changes will reverse the company’s fortunes brings to mind yet another: Time will tell. ME Manufacturing JAN/FEB-09 Executive 33
For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.