Smoothie firm Innocent Drinks has begun operating a single forecasting system after completing a research and implementation project that began in 2006.
“A lot of challenges we were having at the time were around the up-scaling of our supply chain,” said project manager Giles Carter. “We were going from picking up the phone to our supplier and saying: ‘Can you get John to run an extra shift tonight because we’ve got a big order through from Waitrose’, to actually needing to build bottom-up factories to supply our product.”
The company initially had two separate forecasts: a weekly 0-12 month revenue forecast and a daily 0-6 weeks customer supply chain forecast, but was keen to narrow this down to just one forecast to increase its efficiency.
“We decided that the demand team, specifically the commercial managers, should be responsible for account level forecasting,” said Carter. “But the account managers weren’t best at handling the process, so we created a demand and revenue planning team to represent the supply chain in the forecasting process. They own the process and make sure things happen when they’re supposed to and they’ll integrate back into the supply chain.”
By clarifying who was responsible for which part of the forecast, the firm helped employees to take ownership of the process. A reward scheme for account managers meant that they were financially incentivised to forecast accurately.
The company decided to focus the forecast on a financial level, rather than on a volume level. “If you’re not making the right decision at a pound level, it doesn’t really matter about volume,” said Carter. “You’re not going to engage your account management team unless you’re talking about financials.”
The biggest debate centred around time and whether the forecast should look at weeks or days, he claimed. “Almost everyone we asked said we should go with weeks and we tried everything to make it work, but we’re a short shelf-life product, and in the end there’s no way you’d manage our supply chain without a daily level forecast. Unless we’re constantly reviewing a daily forecast, we’ll never be able to respond to promotional demand.”
He said that the systems search was particularly tough. The company whittled down a list of over 180 potential software suppliers and eventually chose Oracle because it offered a broader scope.
“In terms of what led to our decision, we had a decision matrix made up of functionality, risk and cost. There’s a multitude of different volume suppliers. But when you get into fairly advanced planning revenues it becomes a lot more difficult - with fast-moving consumer goods you have fairly complex promotional pricing mechanics. The final decision came down to scope.”