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Improving Promotional forecasting to reduce waste

Musgrave and United Biscuits case study, December 2011. Improving Promotional forecasting to reduce waste. Background.

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Improving Promotional forecasting to reduce waste

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  1. Musgrave and United Biscuits case study, December 2011 Improving Promotional forecasting to reduce waste

  2. Background • Musgrave , which trades as Budgens and Londis in the UK, operate through a network of franchise stores and work closely with retailer partners to deliver sustainable and cost-effective waste solutions • Waste management is an important part of Musgrave’s CSR programme and the retailer has pioneered the concept of ‘one-stop-shop’ regional waste management contracts • As well as working with retail partners, Musgrave engages with its suppliers to reduce waste in the supply chain, one of these companies is United Biscuits • United Biscuits also has an extensive sustainability programme and works to - Reduce carbon emissions and energy use - Reduce waste sent to landfill - Reduce water - Reduce packaging waste - Increase the use of environmentally friendly transport Source: IGD

  3. Key milestones Through a collaborative programme, funded by WRAP and facilitated by IGD, Musgrave and United Biscuits established a dedicated team to identify the opportunities to reduce food waste. The team did this by collecting existing KPIs to prioritise and undertake a detailed process mapping project. Source: IGD, Musgrave, United Biscuits

  4. Identifying the opportunities This process three key opportunities to reduce waste in the supply chain: Stockless Improve promotions management Review the range Source: IGD

  5. Improve promotions management Promotional lines represented over half (56%) of Musgrave’s food waste in value terms, with cakes, crisps, snacks and nuts identified as key areas to focus on. • Strategy • Improve joint business planning • Make the budget forecast and assumptions more visible • Better alignment of timelines • Planning • Work to one aligned process • Better understand accountabilities along supply chain • Earlier forecasting inline with production planning • Establish weekly meeting to improve communication The dedicated team jointly explored the issues that were contributing to waste in the promotions process and established four new ways of working • Execution • Increase focus on initial stock phasing into depot • Improved communications of ‘actual’ Vs ‘planned’ performance • Collaborative monitoring and adjustment of orders • Focus on end of promotion execution and exit strategy • Review • Category team establish • post promotion review of the process and KPIs • The learnings will be built into the next promotional cycle Source: IGD, Musgrave, United Biscuits

  6. What collaborative planning has achieved Before A lack of collaborative planning led to reactive fire-fighting and non-value added activities There was insufficient two-way communication and inaccurate information flows both across functions within United Biscuits and Musgrave and between the companies Not a fair understanding and alignment of key business processes (e.g. Promotions and seasonal management)  Unclear people structures and roles/responsibilities, with ‘silo’ mentality between businesses and across functions. Lack of visibility and alignment of commercial and supply chain strategies and some conflicting KPIs • After • The promotions process is now aligned both across different divisions within each company and between the two companies: • Musgrave and UB have an integrated process and timeline • Individual roles and responsibilities are understood and lines of communication are clear • A collaborative planning and review process has been established to build continuous improvement and reduce non-value adding activities • Improved alignment of strategic and commercial planning • An end-to-end approach has been established and promotions are measured across their lifecycle Source: IGD, Musgrave, United Biscuits

  7. Benefits of collaborative planning By implementing this process, Musgrave has reduced product waste as a percentage of sales from 2.92% to 1.16%. Promotional line wastage has reduced from 19.5% to 6.3%. Source: IGD, Musgrave, United Biscuits

  8. Stockless With cakes being the single biggest waste driver (at 39% of value), the team identified an opportunity to move cake from stock-held to stockless and prevent approximately 14 tonnes of waste each year. • After • Musgrave worked with United Biscuits and other cake suppliers to move to flow through or stockless model: • Move from stock held to stockless so cakes are delivered to store on the same day as arriving at depot • Completely removes depots based ‘short-dated’ wastage • Retailers and consumers get significantly improved product-life • Drives promotional sales, improves availability and removes waste Before Cake is delivered into four of Musgrave’s depots twice a week and held for store-picking The key constraint is that this initiative also drives additional transport costs, so the move to flow through needs to be part of the overall commercial and environmental plan. Source: IGD, Musgrave, United Biscuits

  9. Range review United Biscuits and Musgrave examined the range and found that 60% of products sell less than 10 cases a week and account for over 80% of waste, in value terms Source: IGD, Musgrave, United Biscuits

  10. Identifying slow selling lines The Musgrave and United Biscuits team analysed the wastage of low volume lines. It was found that approximately 60% of the range is slow. The slow sellers represented around 25% of sales value, 13% of total volume and over 80% of wastage at value and 7% as a proportion of sales Low volume lines were driving waste mainly in the cakes and crisps/snacks/nuts category. There are some lines where the minimum order quantity (MOQ) drives more stock than stores will sell in the product’s life. • As a result of the review the analysis category teams now focus on the end-to-end value chain: • Consumer offer • Rate of sales and margin • Wastage and stock levels • MOQ versus volume • Improved reporting and dialogue is creating visibility to net profitability. This is driving better decision making for the existing range and new lines: • Opportunity to drive sales • Review store distribution • Removing range where this is the best commercial decision Silo ‘ways of working’ and KPI’s are being broken down. Decisions are increasingly based on all factors, including wastage. Five lines have been de-listed and this will reduce wastage by 0.7 tonnes per annum. Source: IGD, Musgrave, United Biscuits

  11. Results • The Musgrave/UB team estimated an equivalent of 13,800 cases or 36.4 tonnes per annum of supply chain waste was prevented during 2010. • 102 tonnes of waste savings and other benefits are anticipated for 2011 from improved forecast accuracy, range review, stock reduction and increased product life • The Musgrave/UB’s promotions process is now aligned both across different divisions within each company and between the two companies • Promotional line wastage has reduced from 19.5% to 6.3%. • The range review led to five lines being de-listed and greater understanding of waste is now used in the decision making process Source: IGD

  12. About Musgrave and United Biscuits About Musgrave Musgrave Retail Partners Ireland, which operates the SuperValu and Centra brands, is the largest co-operative retailer in Ireland. In the UK the retailer operates through the Budgens and Londis brands Member stores are provided with central services including purchasing, supply chain, category management, marketing, human resources and IT. • About United Biscuits • United Biscuits is a leading snacks business producing a range of sweet and savoury snacks including McVitie’s, Jacob’s, Carr’s, McCoy’s and Hula Hoops, • UB's strategy involves driving long-term sustainability in the business and encompasses three key areas: • Financial • Environmental • Community Source: IGD

  13. Further information • IGD would like to acknowledge WRAP, Musgrave and United Biscuits in the development of this case study • For more case studies on how retailers and suppliers are implementing improvement initiatives, please visit the case study section on Supply Chain Analysis • Other case studies on Musgrave and United Biscuits featured on Supply Chain Analysis include Musgrave’s initiatives to reduced miles travelled and United Biscuit’s initiative with Nestle • Subscribers can: • Gain further insight on supply chain strategy and planning, by reading our in-depth reports here • For a detailed understanding of leading retailers’ supply chain strategies, click here • Read IGD’s best practice case studies on supply chain, click here • For any other information, please email Nick Downing at nick.downing@igd.com or call him on +44 (0)7730822274

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