Fresh from JDA Software's Focus Global Conference, Danny Halim, vice president of industry strategies, offers the view that despite a tough economy, supply chain executives will seek out information and resources to fulfill strategic goals. And chief among those goals is the effort to continue improving operations with quantifiable results.
Without neglecting a longer term strategic view, many logistics and supply chain executives from a variety of industries were looking for innovations that could produce results within a short time frame. The question of the day could be paraphrased, “What can we do in the next six to eight months remaining in 2009?”
Cost reduction is always a theme, says Halim, but many companies are looking to cut costs strategically. He offers the example of HJ Heinz Company, which JDA recognized with its Best in ROI, Real Results award. The $10 billion global company which sells 650 million bottles a year of its iconic ketchup, employs 32,500 people globally. Its top 15 brands account for more than two thirds of its annual sales. The 140-year-old company achieved substantial results in the first wave of their strategic initiative by rebalancing inventories across all of their North American supply chain, according to Halim. The company achieved a 9% reduction in safety stock in three to four months, says Halim, with an immediate impact to their cash flow.
Cash is king in this economy, says Halim. Companies with stable cash flow, he explains, are the ones that can actually think about the next steps and ask what are the next innovations that they want to do—from product innovations, new product launch or product extension.
Sticking to the theme of focused efforts and quick returns, Halim describes how Hershey Foods achieved strategic logistics cost reductions through improved transportation. Started 116 years ago as a subsidiary of Milton Hershey's Lancaster Caramel Company, the company most people know today has sales of $4 billion, employs over 13,000 people and exports to more than 90 countries. To achieve cost goals, the company took advantage of the density of its network on its outbound continuous-move routes. Hershey is taking that to the next level and expanding those continuous-move routes to include inbound. They're not only optimizing backhauls but picking up raw materials, packaging materials, etc. from their inbound routes to take advantage of the route they already have. Essentially, they're integrating their fleet management as a current initiative, according to Halim.
In addition to planning and execution on outbound logistics, home improvement retailer Lowe's Companies Inc. took more control of import processes. The $48.2 billion retailer took the position of looking at inbound logistics and the logistics planning, consolidation and deconsolidation processes to achieve more leverage and cut costs.
From the time Frank C. Mars learned to hand dip chocolate as a child in 1882, through his years selling molasses chips and into the launch of the company that became Mars Inc. and gave birth to such brands as M&Ms, sales and operations planning have been important if not completely formal practices. Halim describes how Mars and The Oliver Wight Companies worked to implement a supply chain footprint to support an executive sales and operations planning process for the now varied businesses of Mars. The company has taken sales and operations planning beyond just supply and demand matching, says Halim and aligned the plans with the financial objectives of the company, reconciling financials to supply and demand and product launch or product innovation processes to achieve corporate objectives.
Halim points to another theme of using innovation as a platform for recovery. E&J Gallo Winery is example of a company that sees this as a time to find opportunities in the supply chain to become more efficient and to grow by improving existing processes so they can be more aligned to what they want to do when the economy turns around, says Halim. The companies that are healthy, have a healthy cash flow, have strategic plans beyond what's going to happen to them in 2009, are definitely investing. They are looking at the question, “What is it that I want to do?” The area where they want to invest varies depending on the individual companies, but the thing that remains number one, says Halim, is, “you need to protect your cash flow.” There must be continuous cost reduction, and you must buffer against the up and down in the market today for security. And secondly, continues Halim, is “What can we do next?” Continue efforts to protect cash flow, continuous cost reduction, buffer against the market shifts and take advantage of margin, are core targets, says Halim. Further, there's a lot of consolidation in the market, and there are opportunities in integrating acquisitions, continues Halim.
There are also companies that are probably on the fence because they don't have their strategic plan and don't know yet how they can go to that level. They're looking for information on how to get there, he points out.
There is a mood of optimism among these companies. They say they aren't done yet; they're going to push on and continue to improve. In the end, the focus is not as much on strategic tools that deliver results in two or three years but what can be achieved this year, but not at the cost of that longer-term strategic vision, concludes Halim.