One silver lining of the Great Recession of 2008-2009 was that it motivated companies to squeeze new efficiencies out of their supply chains. For a consumer products giant like Unilever, getting a better handle on demand is a good idea regardless of current economic conditions.
Unilever is one of the world's largest suppliers of consumer packaged goods, with more than $63bn in revenues in 2010. Its hundreds of household brands include Lipton, Hellman's, Dove, Knorr and Vaseline. Most of the business falls into two categories: food and beverage, and home and personal care.
Unilever supplies retailers around the world both large and small, and getting an accurate picture of consumer demand at all points of sale can be a daunting task. In 2006, the company began a U.S. pilot of demand-sensing software from Norwalk, Conn.-based Terra Technology. Early results were positive, although wider adoption had to wait for another two years because of more immediate corporate priorities.
It wasn't until August 2009 that Unilever went fully live with Terra's demand-sensing application for retail products in the U.S. The benefits of the technology were quickly evident, according to Priya Notani, Unilever's global project manager for demand-sensing and multi-enterprise inventory optimization. In the first year of using the tool, she says, the company saw a 40-percent reduction in forecast error within a seven-day planning horizon. At the same time, it was able to reduce inventories, a key goal both from the standpoint of working capital reduction and environmental responsibility. In addition, by having the right item in the right place at the right time, Unilever could lessen its dependence on expedited shipments and transfers between distribution centers, Notani says.
A year later, in August 2010, Unilever extended the system to include Canada, as well as its Food Solutions business, which supports the food services industry.
An Ambitious Rollout
By early 2010, the company had begun preparations for rolling out the demand-sensing application, along with an inventory optimization tool from Terra, on a global basis. Europe, Asia and the Americas region were the targets, and Unilever wasn't thinking small. It has planned for full implementation throughout all regions by the end of 2013. "It's astonishing, the pace they're on," says Rob Byrne, Terra's chief executive officer.
Terra's software is relatively new in the marketplace. Introduced at the end of 2002, its first implementation was with the Campbell Soup Co. The technology really took off in 2006, when Procter & Gamble purchased a global license. "That put us on the map from a sales standpoint," says Byrne. "It brought us a lot of attention."
The demand-sensing application draws on multiple data streams, including the user's sales forecast from the demand planning group, customer order flows, sales histories and some master data, such as shipping calendars. Having clean and accurate data is essential to obtaining the right number, Byrne says. Equally important is getting access to the data quickly, creating a challenge for any IT provider.
Although it plans to phase in the system on a country-by-country basis, Unilever is essentially treating Europe as one single rollout. Fortunately, Notani says, the countries are "very much in sync" with regard to business processes and systems. Plans call for a go-live in Europe in the third and fourth quarter of this year, with the United Kingdom included in the first phase. As it did in the U.S., Unilever plans extensive testing of the system in Europe before flipping the switch, Notani says.
Unilever's mantra of "Design Once, Deploy Everywhere" has given rise to a global framework and way of working. Notani doesn't foresee any major problems that might arise from current business practices in those regions."There are certain differences in market conditions that have to be modeled at the outset, for example different customer order patterns in [various] regions," she says. In addition, "multiple stakeholders" must be brought into the process, with a constant focus on the requirements and benefits involved.
As for Asia, India is already live on Terra's inventory optimization module, and demand sensing will be added shortly.
Collaborating With Retailers
Currently the application is limited to merging data from internal sources. Notani says Unilever is considering adding "multi-enterprise" demand sensing (MDS), whereby it can draw on point-of-sale information from retailers. A couple of simultaneous pilots have been completed, with positive results so far. For the moment, though, Unilever's priority is to replicate the successes in North America.
P&G went live with Terra's multi-enterprise module in 2008, using it to share data with distributors in China, Byrne says. Three more customers have also purchased the software. As for Unilever, "it's really their call." He sees a growing awareness among the vendor's customer base that "if you could use this [external] data, you could make better supply-chain decisions."
Manufacturers and retailers have been trying to share sales data for years, particularly with the help of the formal Collaborative Planning, Forecasting and Replenishment (CPFR) model devised by major retailers, IT vendors and consumer-products suppliers. Byrne says CPFR hasn't fulfilled its initial promise because of scalability and staffing issues. Still, he's confident that the MDS concept will catch on with Terra's customers, including Unilever.
As for Unilever, it is assigning a high priority to collaborating across the "end-to-end" supply chain. Access to POS data will result in an even better demand signal and more accurate forecasts, Notani says. For the moment, the company's priority is ensuring a successful implementation of Terra's demand-sensing and inventory optimization modules on a global scale. In parallel, she says, Unilever hopes to "explore the MDS opportunity."
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