Why bother to remodel a room when you can tear it down and start from scratch?

That's the thinking that appears to have driven the J.R. Simplot Company toward a complete overhaul of its supply, demand and logistics-planning systems.

It wasn’t supposed to happen that way. Simplot knew that its planning systems were “very long in the tooth,” as John Ball, senior director of optimization, describes it. “They were unreliable, and weren’t going to meet our long-term objectives in terms of business development.”

The vertically integrated producer of seeds, fertilizer, frozen foods, food brands and related services has its own set of unique challenges. From a demand perspective, it’s more oriented toward commercial business than retail. As a result, the customer base shifts “fairly significantly.” Simplot relies heavily on distributors, who can be unpredictable in their requirements.

“We do have long-term customer relationships,” says Ball, “but those customers give you more or less of their business at any given time based on production location, quality of your product and the quality of the relationship.” And in the agricultural business, product supply, location and quality can vary sharply from year to year.

The coming of a new president into the Simplot food group triggered a much more ambitious approach to systems updating than was previously contemplated. Ball says the company had a well-defined sales and operations planning (S&OP) process in place, “but the tools weren’t up to the challenge.” For example, when Simplot engaged in rough-cut capacity planning, it had to leave plant location and logistics considerations out of the formula for determining the best place to make product.

Initially, the company had planned to replace only its demand-planning module, but the new group president saw the need for more radical action. He pushed Simplot to replace its entire S&OP suite.

The company knew it was in for a challenge, so it took its time moving forward. Evaluation of potential systems took a year, and implementation, including process changes, two more. The project would proceed in stages, with demand planning being tackled first and rolled out quickly. After that came supply planning, which Ball refers to as “the guts of the operation.” It requires a view of the entire manufacturing footprint, complete with related costs and distribution lanes.

Choosing a Vendor

Simplot’s choice of a technology provider, following development of a detailed requirements list and evaluation, was Logility. Ball says the company was drawn to the vendor in part because it supplied an implementation team that eliminated the need for a third-party integrator. “[Logility’s] role was completely intertwined with us,” he says.

Which turned out to be a good thing, given the scope of the project. Logility vice president of marketing Karin Bursa says the engagement turned out to be more comprehensive than it might have seemed at first blush.

At the outset, she says, “John probably didn’t convey the magnitude of what they were going through.” Simplot wasn’t just looking for a new suite of software; it was in the throes of culture change, while simultaneously bringing on line a massive new facility in Caldwell, Idaho. Dubbed Project Idaho, the effort involved construction of the world’s largest sweet potato processing plant. As it that weren’t enough, Simplot was undergoing a corporate-wide upgrade of its enterprise resource planning (ERP) system. Says Bursa: “It was one of the biggest transformations I’d seen of our customers, in a pretty short time.”

The S&OP initiative drew heavily on Simplot’s own human resources. Ball says the company tapped individuals from multiple functions – production planning, demand planning, finance, information technology – numbering as many as 20 at any given time.

They ended up shouldering a significant burden. “We came to the edge of disaster in burning out certain people who kept their day jobs and stayed focused on the implementation for long periods,” he says.

Ball says the measured approach to implementation was key to the project’s ultimate success. “We allocated a sufficient level of time to get the work done, and did a good job of partnering with Logility to make sure it came off reasonably well.”

Simplot was acutely aware of the risks of taking on such an ambitious I.T. initiative. “Our first objective was not to break anything, or detract from our ability to efficiently do supply-demand matching,” says Ball. Moreover, when it came to supply planning, the company had to take into account a supply base that was “far more encompassing than before.”

Flipping the Switch

For all that, things went relatively smoothly, once Simplot and Logility “flipped the switch” on a new system. And the benefits quickly became evident. The company had access to detailed bills of materials in its planning module, allowing for better planning of input resources. At the same time, it was able to deploy inventory in a more efficient manner.

Ball can’t say that Simplot is booking more revenue as a direct result of the new S&OP tool set. But he strongly believes that the company today is better positioned for growth, and able to take on new segments of business as they arise. For example, it has become more deeply involved in the vegetable and avocado businesses, to supplement its traditional emphasis on potatoes.

There’s more to be done. Inventory optimization, delayed in favor of implementing demand, supply and manufacturing planning, is now back on the agenda. Up to now, Ball says, “we haven’t even discussed optimizing input inventories rather than focusing exclusively on finished-goods inventories.”

Bursa added that Simplot sees a “huge opportunity” in adopting multi-echelon inventory optimization. In tackling raw-materials usage, along with in-process staging of manufacturing, it can realize greater flexibility in serving often-unpredictable customers. “They’ve been steadily improving their forecast accuracy and service levels since going live with those elements.”

A good deal of future improvements can be realized simply by making greater use of the tools that are now in place, Ball says, adding: “There’s a lot of ground to be plowed, and more benefits on the horizon.”

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J.R. Simplot
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