Churchill China plc is one of the world's major manufacturers and distributors of high quality ceramic tableware. Based in Stoke-on-Trent, England, Churchill supplies a wide range of ceramic tableware and related products around the world through an extensive network of retailers, agents and distributors. Over recent years, Churchill has developed from its base as a cost efficient manufacturer to also become a leader in product design and quality. Of equal focus is the company's longstanding commitment to customer service, which it backs with regular investment in logistics and information technology. Most recently, the company implemented a solution from Prescient Applied Intelligence, West Chester, Pa., to help manage inventory in its retail supply chain. Alistair Henderson, network manager, led the implementation.
Q: What is the background of this recent IT project with Prescient?
Henderson: That involves telling you a little about how Churchill China is structured. The company has annual sales of around $88m, which is divided pretty much evenly between a catering division and a retail or domestic division. This project we are talking about today involves the retail division, not the catering division.
Traditionally, Churchill was a U.K. manufacturing organization. However, because of competition and the big high street retailers wanting lower prices, we have had to outsource manufacturing for our retail division. This switch was giving us quite a large headache in terms of our supply-chain and our lead times, as you can imagine, and that is why we brought Prescient in to help us. We also have recently strengthened our forecasting team, which will enable us to make even better use of the software.
As the network manager here I am responsible for anything that is connected to a piece of wire as well as implementation of business projects. This was quite a large business project that required IT inputs, which explains my involvement. I don't actually do the day-to-day running of the program, but I implemented it and wrote the procedures in accordance with the planning and forecasting teams. Our employees really had not worked with software like this before-previously everything was done by hand-so it was a rather steep learning curve for everybody. So the forecasting guys actually do all the day-to-day running of it, but my team supports the software and is involved with the business processes behind it.
Q: What is a typical shipment profile for Churchill China?
Henderson: Our product lines include earthenware, fine china and bone china and we sell everything from individual pieces to 20-piece or 30-piece dinner sets, three-piece completer sets and so on. Really, it's whatever the high street retailers want-we will pack to whatever configuration they require. We outsource production all around the globe: from China, Eastern Europe and South America. We sell mainly in the U.S. and U.K., and also a fair amount in Austral-Asia.
As I mentioned before, when we were a U.K. volume manufacturer, we could respond very quickly to customer changes and market changes. Our lead time was something like six weeks from the time an order was placed until delivery, if the item was not in stock and we had to manufacture and ship it. Now, with outsourcing, it takes us up to four months to get the stock after someone places an order. So, obviously, we knew we had to increase our level of safety stock. At the start, we were successful to some degree at this, but then sometimes we actually kept too much stock and other times it just went straight out the door and we were stocked out for a month or so. We still had some manufacturing capacity in the U.K. that we could fall back on to stay in the game, but we recognized that this wasn't the best way to do it because of the costs involved. And now almost everything is outsourced so it is even more important for us to hold the correct levels of safety stock and to profile our customers' demand correctly. That is what we are able to do using the Product Profiling tool from Prescient.
We had implemented Demand Planning from Prescient about a year ago and I just happened to be speaking to one of the support guys one day and he mentioned this new product that Prescient had introduced. We took one look at it and had a quick demonstration and instantly knew that this was for us and we had to have it. We bought it there and then and we haven't looked back.
Q: How does it work?
Henderson: Basically, we first classify products into two areas: those that are specific to one certain retailer and those that many retailers may take up. Of these, the products specific to a single retailer are easier to do because our customers give us forecasts. But, before, they were blind forecasts in that the figures came from their systems and we really couldn't check them. Now, when they give us a forecast, we are able to match their figures against the forecast that we generate in Prescient. If there are discrepancies, we highlight them and the sales people take it up with the buyers.
This is proving to be quite a good process. Before, there were instances where a retailer would say it was going to take so many thousands of a product and it actually ended up taking so many hundred, which meant we were left with a rather large stockpile. This tool gives us a better feeling for the accuracy of the figures the customer gives us and, as a result, we can maintain the correct stock levels.
In the situation where product was going to multiple retailers, we truly were in the blind. If we thought we had a pretty good product, maybe a mug, we would look at similar products and say, "OK, we did roughly that much on this similar product and we think this is a better mug, so let's increase projections by 20 percent." That would determine our first initial order and then we would see how it went. It was hit and miss. Now we can actually profile the product. We use the Product Analyzer to look at multiple products that have the same characteristics and we aggregate them or average them out to get the best profile. This is especially helpful in establishing our first-quantity order on new products and, of course, ongoing orders as well.
Q: Do you have a lot of new product introductions?
Henderson: Absolutely. About 60 percent of our sales every year are from new products. Tabletop has become a very fashion-led market. The market used to be much more traditional, where people would buy the same pattern or receive pieces as gifts over several years. Now, you have people who redo their kitchen in whatever color is fashionable this year and they want their crockery to match. A year or so later they may paint a different color and they want new crockery.
Q: What are some of the inputs that go into profiling a product?
Henderson: With mugs, for example, we often create profiles based on price points, especially for the U.K. market. We may have a 99p price point, a one-and-a-half pound price point and so on. Now a retailer may tell us that he wants a range of mugs at three or four different price points, which he defines. So our designers go away and come up with the ideas and the retailers say yes, we like that, and that starts the process.
So now we have the designs and the price points. What then has to be decided is that question of how much production to commission as a starting point. That's where we use historic information. We know the product is already grouped into these price points. So we go to Product Profiling and we look at the historical performance of existing mugs at the same price point.
For example, let's say we require a profile for a 99p mug. At that price point, we know from experience that these mugs will fly off the shelves at certain retailers. We know that other retailers will take them, but they won't sell through as quickly. So we may end up having two profiles for this price point. The way we resolve that is to go into the Product Analyzer where maybe we have profiles on five similar SKUs at this same price point and we get the history of those products, probably for the last 12 months. Then we can decide if we want to apply one of these existing profiles to the new mug or we can create a new profile. That really is as hard as it gets, to be honest.
Q: Does profiling actually help you get new products to market faster?
Henderson: No, it doesn't impact that, but it does enable us to buy the correct amount of product for the marketplace. Before, we bought cautiously because we didn't want to fill the warehouse with brand-new product that wouldn't sell through. So on many occasions, we brought product in and sold it through within the first month and then we were stocked out for three months. The Prescient system enables us to purchase products properly and to the correct amount, with substantial hard evidence behind it. We can say with confidence what we believe will happen with this product and what the forecasts should be going forward and, therefore, what amount we should buy. It just gives that hard and fast bit of numbers and hard evidence for the sales and marketing group to say, "yes, we agree with that, this is what we should be buying." It hasn't helped get product to market faster, but it has helped us keep the product in the market and in stock for a longer period of time.
Q: What about retiring products. Do you use the software for those decisions?
Henderson: We have not quite gotten to that stage. At the moment, we still are doing that outside the system. However, we are working out how to use Prescient to extract products that show downward trends four and five months out, so we can get a heads up on products that are petering out or failing. That is the next stage we are going to with Prescient.
Q: Do you sponsor many promotions and do you use the software to help mange that?
Henderson: We don't go out and push promotions anymore. The major high street retailers make those decisions and they give us the data there. They tell us they are going to do a buy-one, get-one free promotion or a 30-percent-off promotion or something like that and they tell us the quantity they expect to sell through. So we rely on the retailers for that and follow their lead.
Q: Have you quantified the benefits in any way?
Henderson: Well, I can tell you that it used to take us an hour to profile a single SKU and profiling now takes less than 10 minutes. If we have existing profiles already set up that we can use, it only takes one or two minutes. That has saved the forecasting team a considerable amount of time.
Our forecast accuracy level is greater because the system is doing it, whereas before we were manually extracting information and creating the profiles so there was an element of error that crept in.
We also have seen definite improvement in our service levels to our major customers and these customers are happier with us now. We are still left with a little too much stock, but this is getting better. We are certainly getting better at stock management and we are not running out of vital stock to service our customers.
We strengthened our forecasting team about four months ago and, as a result, we are introducing more processes that we need to be going through. We had Prescient working well but the person we brought in has highlighted some areas for further improvement and now we are progressing with processes outside Prescient that will help the software give even better results. We are going through that now.
So Prescient has allowed us to be a bit more smart in terms of our stock management and now that we have a stronger forecasting team, we believe we will see more benefit this year. We now have all the information in our back office systems to feed Prescient with the information that it requires, so we will definitely see a bigger advantage this year. We made a few mistakes in the beginning, but you learn by your mistakes. Going forward, we have all the processes in place and so it should be a good year for us.
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