Improved insights give Nestlé the competitive edge

We all like seeing our favourite products on special but there’s more to running a promotion than simply deciding to cut prices.

Discounted prices lead to an increase in demand and unless this demand is accurately planned, manufacturers can find themselves with either too little, or too much stock.

Nestlé Oceania demand manager Davis Wu says for a fast moving consumer goods organisation such as Nestlé, accuracy around demand planning is crucial.

“Previously, if we were going to run a promotion we’d look at what the demand was for similar promotions in the past,” Wu says. “However, this didn’t consistently provide an accurate plan; we needed a more holistic view for better demand planning.”

We can now work out the best time to run a promotion or what would be the best discount price to offer, rather than just guessing ....
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Davis Wu
Demand Manager


Efficient manufacturing relies on accurate planning

For Nestlé’s factories, inaccuracy in demand planning has flow­on effect on production scheduling of finished goods and amount of raw and packaging materials to be purchased, potentially causing delays in production, and failing to serve customers.

“We need to ensure raw materials orders from our suppliers are accurate so our products are produced in time and as fresh as possible when they hit the shelves of our customers,” Wu says.

Nestlé is a global leader in nutrition, health and wellness products and has been providing consumers with a wide range of food and beverage products for more than 100 years.

Its Oceania business employs more than 6000 people, operates 12 factories, five distribution centres and 20 offices across Australia, New Zealand and the Pacific Islands.

Improving accuracy around demand planning

Nestlé implemented SAS® Forecast Server to enhance its processes and achieve greater accuracy in demand planning.

“Over the phased implementation, we’ve seen improvement in demand plan accuracy, in particular bias,” says David Hix, Nestlé Oceania supply chain director.

Since the implementation, Nestlé has reduced the forecast bias to less than half of what it was prior to using SAS, resulting in lower working capital.

Nestlé is now also able to adopt a more holistic approach to its demand planning and operations.

“If we run a promotion on one size of particular product, we know that our other sizes of that product are going to be affected and we can quantify the effect and make changes in our demand plan, improving its accuracy as a result,” Hix says. “We are now making smarter business decisions.”

Nestlé has also changed the way its supply chain, sales and marketing divisions collaborate.

“Instead of making different demand plans, all parties provide key inputs to generate one demand plan,” Hix says. “We call this the ‘single source of forecast’ and this process ensures that we plan our business based on facts with inputs from all parties.”

Wu says planning promotions based on facts rather than intuition has helped it gain even more insights.

“We can now work out the best time to run a promotion or what would be the best discount price to offer, rather than just guessing based on opinions or experiences of individuals,” Wu says.

Hix says feedback from users since the implementation has been overwhelmingly positive, in particular from senior managers, whose engagement in the project is high.

“It was important to us that the solution could be deployed to all planners, even those who don’t possess statistical or technical skills,” he says. “Senior managers also recognise the impact of best return on investment in key areas such as promotion planning and marketing spend.

“The next key objective is to continue to further improve our promotional planning and marketing spend and embed it into all key decision-­making processes,” Hix says.

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Challenge

Difficult to consistently and accurately plan sales demand around promotions.

Solution

SAS® Forecast Server

Benefits

  • Improved the accuracy of its demand planning.
  • Can look more holistically at the impact of a promotion across the business.

About Nestlé Oceania

Nestlé Oceania is a global leader in nutrition, health and wellness products. Its Oceania business employs more than 6000 people, operates 12 factories, five distribution centres and 20 offices across Australia, New Zealand and the Pacific Islands.

The results illustrated in this article are specific to the particular situations, business models, data input, and computing environments described herein. Each SAS customer’s experience is unique based on business and technical variables and all statements must be considered non-typical. Actual savings, results, and performance characteristics will vary depending on individual customer configurations and conditions. SAS does not guarantee or represent that every customer will achieve similar results. The only warranties for SAS products and services are those that are set forth in the express warranty statements in the written agreement for such products and services. Nothing herein should be construed as constituting an additional warranty. Customers have shared their successes with SAS as part of an agreed-upon contractual exchange or project success summarization following a successful implementation of SAS software. Brand and product names are trademarks of their respective companies.

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