Scott Hines is director of supply-chain integration at Pactiv Corp., whose long line of products include Hefty brand trash bags, the "slider segment"of the food bag market and disposable foam tableware. At Pactiv, based in Lake Forest, Ill., Hines has held a number of positions, including director of distribution and director of transportation.
Q: As we enter a new year, what technology initiatives do you see in general, and for Pactiv?
A: I wouldn't expect to see gigantic ERP implementations as much as you've seen in the past. What you will see is a much greater focus on what the return will be on technology investments. Of course, that tends to be easier with very defined projects with smaller costs.
There also will be a focus on taking what you've got, figuring out if that's sufficient, and then how to effectively utilize and leverage the technology that's in place. That's where we're focused right now.
Q: Do you find that companies have not been fully utilizing whatever technology they already have?
A: Definitely. It's happening across companies, and it's certainly happening here. One of the things that we're trying to put in place now involves the final rollout of SAP. Our ERP suite really combines SAP and Manugistics for most of our operations. Now that that's complete, we're in the process of putting together a group sort of like a Center of Excellence that will include people with really deep expertise in particular areas. The goal would be to look across functions and come up with solutions. They will look down the road to see what the technology would allow us to do, in order to propose potential business solutions. These solutions might require some sort of process change rather than simply focusing on technology changes.
Q: What business process changes are there on the radar screen?
A: I think at Pactiv in the upcoming year the process change will be focused mostly in the warehouse/distribution area. In the past, we've done a lot of customization on the order management side, especially pricing. Now, on the warehousing side, we need to be more flexible for our customers. The trend has been a move toward greater lines per order and fewer cases per line, and this brings productivity challenges.
We're looking at a new product, Task and Resource Management, that SAP has coming out. It will require an upgrade, a relatively minor upgrade compared to a new ERP implementation, but the hope is that it would help us really gain great productivity while also enabling greater flexibility.
Q: You're talking about warehouse management functionality?
A: Yes. A couple of weeks ago, several us spent some time at SAP's headquarters learning about what they have coming out. They told us they want to compete as a world-class warehouse management system. They obviously would like us to use all the planning and order management tools that they have, but we said they have to really help us understand what benefit that would be because what we've got now is working pretty well. We've got investment in Manugistics tools, and if doesn't financially make sense, if there isn't an obvious return, we're not going to make a change like that.
Q: Is that true of other companies as well, or is your situation unique?
A: I think that's true of other companies. I know that I've talked with Unilever Best Foods, and they're essentially using the same kind of tools we are.
Q: Other technology trends or projects?
A: The other challenge is forecast accuracy. We're really trying work on that: How do we get a forecast that helps us with our inventory planning and positioning to meet and improve our service levels while, at the same time, still taking inventory out of the system. That's a really pretty challenging piece, and that's something we're focused on going into next year. I think that's pretty true across all companies based on discussions I've had.
In 2003 and beyond, we will take a hard look at when we should change process versus trying to customize and fit the software technology solution to our current process model.
Q: Someone might have thought your warehousing would have been outsourced. Is any of it managed outside?
A: We have a few relatively smaller operations that are outsourced, and the largest of those would be a 300,000-square foot operation. But the biggest sites are Pactiv-managed.
Q: What about outsourcing the transportation of the product itself?
A: We tend to have relationships with national and regional carriers and that seems to work pretty well for us. We are primarily truckload and intermodal - we've got only a small percentage of less than truckload freight.
Q: Tell us about those customer relations.
A: I think collaboration provides a very clear benefit to the supplier. The challenge is working with the customer and showing that there is value to both sides. We've approached that by starting with our real key customers, the largest ones, the ones willing to spend time and people in making that work. We've sent people to some key customers' operations to see if there are some things we can do to help them. So it's not only information flows; there are other things we can do to help each other. For instance, we're noticing ordering patterns that make it difficult to pick and then load the trailer and ship that out. It's pretty likely that our customers are dealing with the same type things on their inbound docks. So we hope to be proactive, and say, "Here are some things to do. In this case it's not going to increase your inventory, it's going to take out costs here, it can increase productivity. These are some things we recommend, if this works for you." And if it does, now all of a sudden, we've got some things that are more efficient for us. And we've helped the customer, who perhaps didn't even realize this was an opportunity before we went to them.
Q: Pactiv touts its ability to deliver multiple products on a single truck. Is this the kind of collaboration you are talking about?
A: You know, Pactiv has a breadth of product offerings that none of our competitors can match. As a result of several acquisitions, we have many plants and separate distribution centers. Before these companies were acquired, customers were placing separate orders and getting different shipments and then having to deal with multiple invoices. Now we've got the products together. It's given us the opportunity to offer people that selection, that gigantic breadth of products. They don't need to go to four or five suppliers. We're making it more efficient now. That phase of the customer strategy really is the differentiator for us.
Q: With the acquisitions came more SKUs. How are you making it more efficient?
A: We have 26 manufacturing locations. But we've tried to get a more rational distribution network in terms of where we're going to store things. The tradeoff we're trying to achieve is inter-plant shipment to get product where it needs to be in order to be able to sell it, and having more of the smaller DCs. These regional mixing centers, as we call them, are between 800,000 and 900,000 square feet each.
Q: Where are these DCs? You have operations in 13 countries.
A: We've got some small distribution plants in Canada, but mostly in the U.S. Primarily what I am talking about concerns two of our three divisions. That would be the consumer division, with the Hefty brands, and it's also the foodservice/supermarket business. A lot of the operations in the other countries are part of the protective packaging division. They tend to be smaller niche companies and they make a lot of products. For instance, I've been working with one of those plants over in England. They make padded mailers and bubble wrap, a lot of things for movers. As an example, we supply Dell with the packaging to protect the PCs. Incidentally, the ERP solution for the protective packaging division is different than what we use for consumer and foodservice/supermarket.
Q: Talk about your internal collaboration. Pactiv introduces 50-plus products each year.
A: We have a pretty defined product life flow. We've got a technology group that does a lot of R&D in conjunction with our marketing folks, who are always looking for new products. I will say that in the past, involvement from the logistics side probably came a little bit later. But we're actually in the process now of improving our routing of information about new things, new products, so that there is a better visibility up front for everybody that will be impacted. For instance, if we've got a new product coming, we will have some idea of what the sales may look like. People can then make better decisions out in the DCs--where should I place this, is this going to be fast mover, is it sort of replacement for something else - that kind of thing.
An interesting challenge came as we replaced the legacy systems in our distribution center: We now have new requirements in terms of pallet quantities and stack height that give us the ability to track and have a big impact in terms of picking logic and putaway logic. That wasn't part of our process before. Now we're going back and making sure that that kind of master data is done ahead of time.
I would say that internal collaboration is getting quite a bit better. Take box strength, as an example. There's always a tradeoff. The corrugate is part of the product cost, but if you end up too light, you're going to get damage and have more difficulty handling it through the supply chain. That interaction has gotten quite a bit stronger and is helping us make the best overall decision for Pactiv rather than for a silo.
When you're looking at things like the boxes, you look at your partnership with the corrugate buyer, and say, help us out here. Help us go back and figure out how to take weight out of the product, change the way it's placed in the box or change the stacking pattern, to take advantage of the way the packaging is designed, minimize cost, maximize storage density.
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