Campbell Soup Company is a $7.5bn leader in the consumer packaged goods industry producing familiar brands such as Campbell's, Prego, V8, Franco-American, Swanson, Godiva and Pepperidge Farm. Campbell Soup North America accounts for over $3bn of that revenue with 26 plants, co-packers and distribution centers producing almost 1,000 products.
In 2001, Campbell adopted a strategy to improve customer satisfaction by aggressively introducing new products to market, introducing a slew of successful products such as Campbell's Soup at Hand. As the number of new products and new distribution channels increased tremendous pressure was placed on an already strained supply chain. Campbell's weekly forecast error was 42 percent and the company was forced to carry excess inventory and incur high shipping costs to maintain customer service levels.
Faced with these challenges, Campbell decided to transform its demand management processes and improve its systems to improve profitability and lay the groundwork for a produce-to-demand strategy. The company started a "Class A" sales and operations planning process by installing Terra Technology's Real-Time Forecasting (RTF) and Real-Time Inventory (RTI).
RTF's approach to forecasting includes analyzing the most recent demand signals each night and adjusting the forecasts to better predict demand. Because RTF detects unexpected shifts in demand when they occur, Campbell is aware of them immediately rather than weeks later. Campbell can react quickly and efficiently to produce or ship additional products without expediting shipments because of missed demand signals.
"The implementation of Terra's RTF has been an unquestioned success within our company," says Michael Mastroianni, vice president of North American planning, reliability and operations for Campbell Soup Company. "The proof is in the pudding. The day we turned the [RTF] tool on, we dropped 50 percent in error [from 42 percent to 21 percent]. From day one, the quality of our shipments from warehouses and plants has improved by that magnitude."
Because of the success of RTF, Campbell implemented Terra's newest software solution, Real-Time Inventory, in 2005. Similar to RTF, RTI uses advanced mathematics to generate a solution, in this case multi-echelon inventory targets. The software uses actual, current data to determine targets and safety stock is significantly reduced.
"We carry 20 percent less safety stock using RTI," says Steve Cortese, Campbell's director of supply chain infrastructure. "At the same time we have become more responsive to our customers. Better inventory management results in a more flexible supply chain and benefits retailers and consumers because the right products are always on the retailers' shelves."
The RTI implementation has exceeded all of Campbell's objectives for inventory and order fill rates, including a $10m savings in inventory in the first year. Safety stock decreased 20 percent and order fill improved 5 percent. Unplanned change-overs due to demand declined significantly, increasing manufacturing stability. The bottom line for Campbell Soup is better customer service and a reduction in costs of over $10m as a direct result of implementing Terra's RTI and RTF.
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