Cool, dark and have some on the web?

"I can’t say what return we’re going to get with this, but I can say we saved £120 million over two years with our [earlier] pan-European internal supply chain initiative. If our suppliers’ and distributors’ supply chains are as inefficient as ours were, we could achieve the same again." So says Colin Neill, supply chain development director at Guinness UDV, of his £2 million web-based collaborative supply chain initiative which, aimed at linking suppliers and distributors around the world with multi-site production (bottling, capping, labelling and packaging) and the rest of the business, is currently being piloted prior to rollout. And those savings will be internal and external. “The right inventory will be in the right place at the right time, it will move faster and we’ll all be more efficient.” Guinness UDV, part of the massive £12.8bn Diageo consumer goods conglomerate, last year turned over of £7.6bn with £1.43bn profits, and is seeing strong growth. With huge global brands like Smirnoff (222 million bottles a year), Johnnie Walker (125m bottles), J&B (74m), Baileys (60m) and Guinness (10 million glasses consumed every day), everything is extreme here. As a result, the system is impressive in terms of scope, scale, sophistication and anticipated benefits – and there’s something here for everyone. In fact, this is not the group’s first foray into supply chain systems. Neill says that about five years ago it was becoming apparent to what was then IDV – now one of Guinness UDV’s constituent companies – that “it was no longer acceptable simply to make what we’d like to make”. He says that back in 1996, the firm had already realised that to improve efficiency and profitability it had to start collaborating internally across its manufacturing and sales operations in the UK – and that meant sharing accurate data, faster and more reliably, and building processes to use it. It started with emailing spreadsheets back and forth. “Even that gave us visibility we hadn’t had before,” he says. But in the late ‘90s, it developed into a substantial supply chain system linking IDV’s own facilities across Europe. “We called it SMR – supplier-managed replenishment – involving our production facilities in the UK, Ireland and Italy with our sales organisations throughout Europe. We were using Manugistics supply chain suite ‘internally’.” And that meant Manugistics’ Demand Planning (DP) forecasting suite, its Fulfilment supply chain execution software and, on the production side, its CPP (Constraints Production Planning) on top of its existing ERP systems. Instant efficiencies It was an early example of CPFR (collaborative planning, forecasting and replenishment) and the advantages were all those we hear about when distributed production and sales get meaningfully together. Says Neill: “Production plans became more stable, so then our lines became more efficient and we were into a virtuous circle of improvement. As a result we were able to reduce safety stock – and not just in production, but out in the supply chain as well because we were planning more reliably.” And when it came to building up for promotions, for example, he adds that the whole system became much more flexible and efficient – able to deliver on time in full without disrupting existing production cycles. Then three years ago, IDV and UD got together to form what was then the world’s biggest drinks company, UDV. Says Neill: “We thought, ‘we’ve done supply chain in IDV – will it work for UDV?’.” So they did. And UDV moved all its European sales and production companies to integrated interaction under Manugistics IT at several levels, bringing together demand and production management. Sales and marketing internationally were communicating with production and logistics; and the system allowed UDV to encourage partnership as opposed to the old contractual relations, and to enable supplier-managed inventory. But following the merger with Guinness, the new Guinness UDV faced an even bigger global supply challenge. The company was experiencing huge growth in its ‘ready to drink’ markets, as well as increasing global diversity, a growing number of remote suppliers and distributors and outlets, and indeed growth throughout the business. The need to collaborate – but collaborate externally – grew. “Our systems didn’t reach out to our global suppliers and distributors. We needed to go for end-to-end supply chain visibility,” says Neill. So two years ago the firm went through a strategic re-assessment of both its business and the appropriate processes and IT, the output of which was an e-transformation roadmap. Key objectives were both to improve efficiencies throughout all of its supply network – not just internally as before – and also to accelerate sales growth through better customer and distributor targeting and participation. And central to achieving it was to get better, more reliable and actionable consumer and distributor information to wherever it could make a difference. Guinness UDV wanted visibility all the way from raw materials and complementary products suppliers, through production, and right out through warehousing and distribution and retailers to customers globally. And what transformed this from concept to reality was web-based applications. “Suddenly, real end-to-end collaboration was possible,” says Neill. Core systems internally include all of Guinness UDV’s many ERP systems, as well as its Manugistics AMS (Advanced Manufacturing Scheduling, currently being implemented) and CPP production systems, and its outward-facing networked Manugistics FE (fulfilment engine) and DPEE (Demand Planning Extended Edition). Integration is via Vignette’s Prospero EAI (enterprise application integration) software. And to get its external retailers and suppliers – who didn’t have the Manugistics software – directly involved, Guinness UDV went for Manugistics Networks Collaborate web-based extensions. In fact, Guinness UDV developed its solution as a series of web portals, each with targeted communications and decision support functionality. One was the supplier portal, covering production schedules, inbound logistics, inventory visibility, VMI (vendor managed inventory), contract management, artwork approvals and product change management. Then there was: a shipper portal, providing shipments visibility and product tracking and tracing; and a collaborative planning portal for web-based forecasting and management of Guinness UDV’s remote co-packers (contract packers). And finally, it designed a customer portal for outlets and wholesalers to handle order capture, self service promotions and account management; and a consumer portal with product and brand information. Says Neill: “We’ve piloted web-based collaborative working with two systems in Italy and one in Scotland running the supplier portal and some of our Italian co-packers running on our collaborative planning portal. And collaborative planning, shipping and customer and consumer portals will be live very soon in Greece with connection back to UK production and sales. “Networks Collaborate has been a great success for us,” he says. “We’re now moving to version 6.2 which has been extended to publish into HTML which means faster access speeds.” To date, web interaction has been via Java Applet technology, and Neill says that with the number of firewalls and nodes involved that meant, “it wasn’t as fast as it could have been: people don’t want to sit waiting for screen paints. But with HTML this will all be corrected.” The Italian and UK supplier collaboration portals start with Guinness UDV production planners in Italy and the UK generating weekly ‘make and move’ plans based on capacity and demand data. The BoM explosion to the component level (bottles, caps, labels, packaging, separators) follows, and is published to the website. Then the suppliers publish their plan, the system compares the two and generates exceptions which the partners can resolve online. “It’s open to the suppliers so they can take what they like from the information,” says Neill. “We don’t want to control that – but it’s an opportunity for them to lower their stock levels and become more efficient. They can see stock at our plants, so they can optimise their production runs and deliveries. In the future, if they have space in their production, they might choose to do some extra for us because they can see what the distributors are selling and what our production is going to be, so they know our stock level agreements won’t be broken. We’ll have this full end-to-end concept working over the web.” Also live is a collaborative planning portal in Italy that spans Guinness UDV’s five local independent co-packers and one owned packer packing Smirnoff Ice –liquid into bottles, packaging and the rest – with all six being supplied by one case manufacturer. Centrally, production planners generate weekly plans and publish those on the secure website, with co-packers reviewing and updating their plans from it, entering actuals and managing and resolving exceptions. But for the case supplier it’s about aggregation of demand for packaging materials, with Manugistics’ DPEE generating the forecast and Networks Collaborate publishing that to the website for the case supplier to drive his production and shipping management. This kind of control is essential. One of Guinness UDV’s huge successes has been the ready-to-drink Archers brand, which grew 300% within the first month of launch. The scope of the collaborative planning portal gives the firm the ability to respond to that by contracting out production and packing in this way while retaining control comparable to internally managed supply chain systems. As for the pilot with Greece, this is the most inclusive – involving all of the shipper, collaborative planning and customer and consumer portals. Says Neill: “This is all about establishing end-to-end flow involving the shipping company, our co-packers, re-packers (re-packing for local demand) and the wholesalers and distributors specifically with Johnnie Walker. We’ll be getting information all the way back from the distributors – what they’re selling, their forecasts, what their stock figures are – to the packers, so they know what they need to make when, and their suppliers can see what they need and so on.” Looking specifically at its use of the shipper portal here, Neill says that for Greece, Guinness UDV sends cases, where it can, in special pallet-wide containers to keep transportation cost down. “So one of the roles of the system is to share information with Maersk so they can ensure the right number of containers are available at the right time for shipping from the plant. Likewise, if there are shortfalls or incidents, they can use the system to let us know. It means no more faxing, phoning, wasted time and errors.” As for the distributors, he says, “We’ve built a portal called Johnnie Walker One-To-One using the same technology. Distributors can log on and get their own information – catalogue, pricing, promotions and so on. Being password protected, it means our various routes to market are separated. The big distributors can do CPFR, and they get order and account management. But we will also be able to look at their forecasts and last year’s figures and do proactive selling, and say, ‘this is what we think you need’, tick the box, or ‘go into the portal and do your own ordering’. Smaller distributors can use their browsers to do direct ordering of however many cases they want. What’s most important is that it should encourage them to use the portal.” Key lessons Neill says in all this there are two key points. “First, it’s very easy to get excited about all this and over-stretch yourself. Where we have failed it was because of that. You need to make sure you do it in bite size chunks. Do your collaborative portals a bit at a time and pilot them carefully. Keep it simple but with the strategy in mind.” And second? “Don’t forget that all the system delivers is data. It’s the people using it that are then able to deliver the benefits. So our system is fantastic – we’ve got information we never had before – but it’s your people and processes that will make or break it.” But another key is delivering partner benefits. Neill concedes you can’t force your supply chain partners to do what they don’t want to. But he says with his web system providing a conduit to such useful information and the portals being so simple to use (“half a day’s training”) you provide the incentive. And for Guinness UDV it will be worth the work, he says. Because the benefits won’t stop at the real time communication, management and optimisation efficiencies. “We believe we have 99% stock availability in our distributors’ warehouses. But our research in the UK shows that we lose 3% in the last 150 yards. Stock is on the site but not on the shelves because the distributor hasn’t refilled them in time. When you consider sales of 125 million bottles of Johnnie Walker alone, 3% is a lot. With this system in place we can concentrate our sales teams on encouraging distributors to keep their shelves stocked and shift the extra product.” And he adds, tellingly: “You know before, supply chain work was all about taking costs out. Now it’s also about putting value in. Much of the value here goes to the distributors. And there’s big money for them if they can sell 3% more and manage their stocks better.” Similarly, Guinness UDV’s suppliers, and those of its co-packers, re-packers and the rest, will also see savings and efficiencies. It’s a win-win-win.