Executive Briefings

CPG Maker That Bought Forecasting Software 10 Years Ago Still Benefits

A conversation with Sam Dragotta, senior director of supply chain at consumer goods manufacturer Church & Dwight, Princeton, N.J.

Church & Dwight Co., founded in 1846, is the leading U.S. producer of sodium bicarbonate, popularly known as baking soda, a natural product that cleans, deodorizes, leavens and buffers. The company's Arm & Hammer brand is one of the nation's most recognized trademarks, but it produces a variety of products under other brands names as well. In recent years the company has grown rapidly, largely through acquisitions. Its forward-thinking decision a decade ago to implement forecasting and transportation management solutions from JDA Software continues to pay off for it today.

Q: We are all familiar with the Arm & Hammer consumer brands. What other brands or products does Church & Dwight manufacture?

Dragotta: In addition to Arm & Hammer baking soda, within the consumer products division we have a variety of household cleaners and deodorizers, oral care products, laundry products and personal care products. We sell these through grocery stores, drugstores, dollar stores and mass merchandising stores. In addition we have a line of pet products that we sell through these types of retailers, as well as through stores like Petco and PetSmart. Our biggest brand there is Super Scoop cat litter.

We also have an Arm & Hammer specialty products division, which focuses strictly on the business-to-business side. It provides bulk quantities of baking soda in a variety of grades to manufacturers of food products, cleaning products and drugs-all types of consumer goods. A small part of this business also is focused on the agricultural market with products that help dairy farmers improve milk production and increase their profitability. A lot of shipments by this division are bulk, moving in 50-pound bags, super sacks or bulk trucks and railcars. It's a different type of business than the Arm & Hammer consumer goods that you normally see on the shelf. The consumer division represents probably 85 percent of our volume.

Our plant-to-DC distribution network accommodates both divisions. We have seven primary plants throughout the U.S. and four primary distribution centers connected to plants, all of which we own and operate-there are no third-parties involved. Not all locations service both divisions, but those that handle the specialty division also handle our consumer products area.

Q: I know you have partnered with Manugistics, now JDA Software, for quite some time. What started that relationship?

Dragotta: In the early '90s, we had a rather antiquated and homegrown enterprise system and not much in the way of forecasting and production planning-mostly just some spreadsheets. Communication was very spotty between the plants and the planning department, which at the time only had three planners. These planners had no idea what the plants were doing on a daily basis and we didn't have any good reporting mechanisms in place. In the mid '90s Church & Dwight decided to install SAP, which we knew would give us a better understanding about what the plants actually were making and what they had on hand, as well as orders that were in the system. But we still needed a forecasting system, and one of the associates on our team at the time had some previous experience with Manugistics, now JDA Software. Our supply chain managers were convinced that the software provider could help us improve our forecast accuracy and production planning, as well as our communication with the plants. So the decision was made to implement.

The executives at Church & Dwight believed that a good planning system would result in a more efficient supply chain, which at the time was a very forward-thinking decision. The software implementation went well, but we ran into problems afterwards because we did not do the training needed to actually have our people use the system the way it was designed. Changing behavior is always difficult, and our associates were used to using spreadsheets, which seemed much simpler. So we sat down with the vendor and shared our concerns. After looking at our processes, they came back with recommendations. They provided us with a consultant to help us with training, and that is what really kicked us off on using the software.

The JDA Software consultant sat with each of the planners one-on-one to discuss how they used the tool and to show them what to do. We also had group meetings with all the planners. That's what really worked for us.

Q: Did you also implement the transportation management module at that time?

Dragotta: Yes, the JDA Software transportation solution was implemented in '96. When we started using transportation management, we had it at four locations. Maybe half of our volume actually went through the system. Today we have about 65 locations using the system, including all of our co-packers and inbound vendors. The interesting thing is that we have handled that increase without having to add any additional planners, even though the number of loads per transportation planner has probably increased 50 percent from where it was four or five years ago.

We concentrate on consolidating orders into full truckload quantities while making sure that we still meet our customers' expectations for on-time delivery. We also use the system for resource management, which was really big a couple of years ago when carrier capacity was a problem. The solution gives us the ability to manage our transportation resources effectively. Not only does it help us select the best carrier from a spend standpoint, but it also makes sure that our employees are not spending a lot of time trying to figure out which carrier should be tendered a given shipment. Also, we really wanted to get a high rate of first acceptances, and the carrier resource management tool allowed us to be successful at that.

For about three years now, we also have been using the JDA Software bidding tool, which now is a strategic part of our procurement process. We are using the bid software for every mode of transportation that we use-not just for initial bids but also for rate adjustments, which can be done in a much more efficient manner.

Q: How are you using the forecasting tool today?

Dragotta: We recently upgraded to version 7.2, which was actually our second upgrade since we first implemented the JDA Software solution. One of the most important things we got with this latest upgrade was a demand classification tool, which really frees our planners from having to touch the forecast. We have three years of history in the system. We use the tool to determine what forecasting algorithm we should use and what the parameters should be, and then we can generate the forecast automatically. At that point, all the planners have to do is just put in any forecast overrides based on new promotions. That's a huge time saver.

Three years ago we installed integrated demand forecasting, in which we started breaking out our history by customer and using that for customer-specific forecasts. For example, we know for each of our major customers how much of every item they took from each warehouse that supports their orders. When you couple that with demand classification it means that we are able to forecast by individual customer. If we want to forecast how many one-pound boxes of baking soda a specific customer will order from our New Jersey warehouse, we can do that. We take the numbers of what they ordered for the past three years, and the demand classification tool will tell us to use this particular algorithm with these particular parameters and it will calculate how many one-pound baking sodas that customer can be expected to order from the designated warehouse for the next 18 months. We are able to do this for all of our major customers.

We used to just divide our forecasts into food and non-food customers without having any real idea what each customer was doing. This is a much better and more accurate system.

Q: How often do you run the forecast?

Dragotta: We forecast monthly, looking 18 months out. Of course, we don't know what is going to actually happen several months in the future. But the software tells us how things are trending. We also get a lot of input during our sales and operations planning meetings, which allows us to fine-tune the numbers as we get closer.

Q: I know you have had several acquisitions. Has this solution assisted in planning for those?

Dragotta: Yes. In the past couple of years Church & Dwight has made two substantial acquisitions: SpinBrush and Orange Glo International (OGI). SpinBrush added about 100 SKUs and OGI added several hundred SKUs. Once we got the history stream from those products, we were able to quickly come up with correct algorithms and parameters so that we could forecast for production planning. Now that all of our planners are trained on the system, it is very easy to obtain the key data and put it into the tool to create an accurate plan that we know will be consistent with all of our other brands. So, even with new SKUs, we can very quickly develop a plan that we feel comfortable will keep us in stock and optimize the inventory.

Q: Have you quantified any savings that you can share with us?

Dragotta: We have some results that indicate how the company is performing. We first implemented JDA Software about 10 years ago. In the past seven years, both our sales and our SKUs have quadrupled, but our inventory as a percent of sales has remained flat. So, we have increased what we are selling and the number of items we manage, but our inventory has remained the same percent of sales as it was when we were managing 300 items seven years ago. I attribute that to a combination of better forecasting and production planning. We used to look at inventory in terms of weeks of supply and we focus on days of supply. Similarly, we used to do production planning on a monthly basis. Now we have much shorter horizons. Instead of telling the plant, 'here is what you are going to make for the next 30 days,' we might tell them what they are going to make in one- or two-week buckets. So we have a lot more control over what they make and where it is shipped.

When I look at Church & Dwight, I view us as a success story in that our executives made a good decision to move forward with software at a time when it was not in vogue to buy software. That decision has certainly paid off. Of course, it is an ongoing process. It doesn't end with one package and it's not about the software alone. Most important is having people who want to make it work.

Resource Link:

JDA Software, www.jda.com

Church & Dwight Co., founded in 1846, is the leading U.S. producer of sodium bicarbonate, popularly known as baking soda, a natural product that cleans, deodorizes, leavens and buffers. The company's Arm & Hammer brand is one of the nation's most recognized trademarks, but it produces a variety of products under other brands names as well. In recent years the company has grown rapidly, largely through acquisitions. Its forward-thinking decision a decade ago to implement forecasting and transportation management solutions from JDA Software continues to pay off for it today.

Q: We are all familiar with the Arm & Hammer consumer brands. What other brands or products does Church & Dwight manufacture?

Dragotta: In addition to Arm & Hammer baking soda, within the consumer products division we have a variety of household cleaners and deodorizers, oral care products, laundry products and personal care products. We sell these through grocery stores, drugstores, dollar stores and mass merchandising stores. In addition we have a line of pet products that we sell through these types of retailers, as well as through stores like Petco and PetSmart. Our biggest brand there is Super Scoop cat litter.

We also have an Arm & Hammer specialty products division, which focuses strictly on the business-to-business side. It provides bulk quantities of baking soda in a variety of grades to manufacturers of food products, cleaning products and drugs-all types of consumer goods. A small part of this business also is focused on the agricultural market with products that help dairy farmers improve milk production and increase their profitability. A lot of shipments by this division are bulk, moving in 50-pound bags, super sacks or bulk trucks and railcars. It's a different type of business than the Arm & Hammer consumer goods that you normally see on the shelf. The consumer division represents probably 85 percent of our volume.

Our plant-to-DC distribution network accommodates both divisions. We have seven primary plants throughout the U.S. and four primary distribution centers connected to plants, all of which we own and operate-there are no third-parties involved. Not all locations service both divisions, but those that handle the specialty division also handle our consumer products area.

Q: I know you have partnered with Manugistics, now JDA Software, for quite some time. What started that relationship?

Dragotta: In the early '90s, we had a rather antiquated and homegrown enterprise system and not much in the way of forecasting and production planning-mostly just some spreadsheets. Communication was very spotty between the plants and the planning department, which at the time only had three planners. These planners had no idea what the plants were doing on a daily basis and we didn't have any good reporting mechanisms in place. In the mid '90s Church & Dwight decided to install SAP, which we knew would give us a better understanding about what the plants actually were making and what they had on hand, as well as orders that were in the system. But we still needed a forecasting system, and one of the associates on our team at the time had some previous experience with Manugistics, now JDA Software. Our supply chain managers were convinced that the software provider could help us improve our forecast accuracy and production planning, as well as our communication with the plants. So the decision was made to implement.

The executives at Church & Dwight believed that a good planning system would result in a more efficient supply chain, which at the time was a very forward-thinking decision. The software implementation went well, but we ran into problems afterwards because we did not do the training needed to actually have our people use the system the way it was designed. Changing behavior is always difficult, and our associates were used to using spreadsheets, which seemed much simpler. So we sat down with the vendor and shared our concerns. After looking at our processes, they came back with recommendations. They provided us with a consultant to help us with training, and that is what really kicked us off on using the software.

The JDA Software consultant sat with each of the planners one-on-one to discuss how they used the tool and to show them what to do. We also had group meetings with all the planners. That's what really worked for us.

Q: Did you also implement the transportation management module at that time?

Dragotta: Yes, the JDA Software transportation solution was implemented in '96. When we started using transportation management, we had it at four locations. Maybe half of our volume actually went through the system. Today we have about 65 locations using the system, including all of our co-packers and inbound vendors. The interesting thing is that we have handled that increase without having to add any additional planners, even though the number of loads per transportation planner has probably increased 50 percent from where it was four or five years ago.

We concentrate on consolidating orders into full truckload quantities while making sure that we still meet our customers' expectations for on-time delivery. We also use the system for resource management, which was really big a couple of years ago when carrier capacity was a problem. The solution gives us the ability to manage our transportation resources effectively. Not only does it help us select the best carrier from a spend standpoint, but it also makes sure that our employees are not spending a lot of time trying to figure out which carrier should be tendered a given shipment. Also, we really wanted to get a high rate of first acceptances, and the carrier resource management tool allowed us to be successful at that.

For about three years now, we also have been using the JDA Software bidding tool, which now is a strategic part of our procurement process. We are using the bid software for every mode of transportation that we use-not just for initial bids but also for rate adjustments, which can be done in a much more efficient manner.

Q: How are you using the forecasting tool today?

Dragotta: We recently upgraded to version 7.2, which was actually our second upgrade since we first implemented the JDA Software solution. One of the most important things we got with this latest upgrade was a demand classification tool, which really frees our planners from having to touch the forecast. We have three years of history in the system. We use the tool to determine what forecasting algorithm we should use and what the parameters should be, and then we can generate the forecast automatically. At that point, all the planners have to do is just put in any forecast overrides based on new promotions. That's a huge time saver.

Three years ago we installed integrated demand forecasting, in which we started breaking out our history by customer and using that for customer-specific forecasts. For example, we know for each of our major customers how much of every item they took from each warehouse that supports their orders. When you couple that with demand classification it means that we are able to forecast by individual customer. If we want to forecast how many one-pound boxes of baking soda a specific customer will order from our New Jersey warehouse, we can do that. We take the numbers of what they ordered for the past three years, and the demand classification tool will tell us to use this particular algorithm with these particular parameters and it will calculate how many one-pound baking sodas that customer can be expected to order from the designated warehouse for the next 18 months. We are able to do this for all of our major customers.

We used to just divide our forecasts into food and non-food customers without having any real idea what each customer was doing. This is a much better and more accurate system.

Q: How often do you run the forecast?

Dragotta: We forecast monthly, looking 18 months out. Of course, we don't know what is going to actually happen several months in the future. But the software tells us how things are trending. We also get a lot of input during our sales and operations planning meetings, which allows us to fine-tune the numbers as we get closer.

Q: I know you have had several acquisitions. Has this solution assisted in planning for those?

Dragotta: Yes. In the past couple of years Church & Dwight has made two substantial acquisitions: SpinBrush and Orange Glo International (OGI). SpinBrush added about 100 SKUs and OGI added several hundred SKUs. Once we got the history stream from those products, we were able to quickly come up with correct algorithms and parameters so that we could forecast for production planning. Now that all of our planners are trained on the system, it is very easy to obtain the key data and put it into the tool to create an accurate plan that we know will be consistent with all of our other brands. So, even with new SKUs, we can very quickly develop a plan that we feel comfortable will keep us in stock and optimize the inventory.

Q: Have you quantified any savings that you can share with us?

Dragotta: We have some results that indicate how the company is performing. We first implemented JDA Software about 10 years ago. In the past seven years, both our sales and our SKUs have quadrupled, but our inventory as a percent of sales has remained flat. So, we have increased what we are selling and the number of items we manage, but our inventory has remained the same percent of sales as it was when we were managing 300 items seven years ago. I attribute that to a combination of better forecasting and production planning. We used to look at inventory in terms of weeks of supply and we focus on days of supply. Similarly, we used to do production planning on a monthly basis. Now we have much shorter horizons. Instead of telling the plant, 'here is what you are going to make for the next 30 days,' we might tell them what they are going to make in one- or two-week buckets. So we have a lot more control over what they make and where it is shipped.

When I look at Church & Dwight, I view us as a success story in that our executives made a good decision to move forward with software at a time when it was not in vogue to buy software. That decision has certainly paid off. Of course, it is an ongoing process. It doesn't end with one package and it's not about the software alone. Most important is having people who want to make it work.

Resource Link:

JDA Software, www.jda.com