Nestlé drives bottom-line improvements with SAS® Demand-Driven Forecasting
Nestlé Direct Store Delivery improved forecasting accuracy four percentage points and increased service levels with help from SAS Demand-Driven Forecasting. Despite growing revenues, the company is able to hold inventory costs flat, and its sales force can better plan profitable sales promotions. Company officials say the savings have exceeded expectations.
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Director of Supply Chain
Director of Supply Chain Integration
Senior Manager for Strategic Sourcing
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Based in Oakland, CA, Nestlé Direct Store Delivery is a division of Nestlé USA responsible for distributing its pizza and ice cream products to thousands of stores nationwide. It's the largest US frozen distribution store delivery network, carrying brands like Dreyer's and Edy's Grand ice creams and DiGiorno and Tombstone pizzas to thousands of stores.
Pizza and ice cream are seasonal and promotion-driven, and variety has exploded in recent years. Twenty years ago, consumers could choose from a dozen pizza varieties and similar number of ice cream flavors. Today, there are whole wheat crusts, gourmet toppings, no-sugar-added ice cream blends and seasonal flavors like pumpkin. With so much variety, shelf space is at a premium, making it critical for producers to ship the right amount of product to the right store at the right time. Meanwhile, Nestlé must make sure product doesn't sit too long at distribution centers, not just to reduce carrying costs but also to provide customers with the freshest, best quality products.
Managing a promotion-driven business
Data was also scattered in numerous locations. Some of it was sitting in spreadsheets in regional offices and might get sent in once a week, if that. In the division that handles delivery to drugstore chains (a growing business), forecast accuracy was decreasing by the year. "It was driving a lot of service issues and increasing our carrying costs," explains Bill Grah, Senior Manager for Strategic Sourcing.
Choosing a demand-driven solution
The accuracy is driven by a change from a 50,000-foot view of forecasts to a more detailed look. "We can talk about a particular deal with a retailer and know what kind of lift is generated, and then that drives the supply chain," Grah says. "There is no second-guessing."
Creating synergy between sales and planning
Using SAS, the demand planners can make calculations and let salespeople know, for instance, that there isn't enough pepperoni in the pipeline near their territory to meet the estimated volume that the promotion will generate, and then work with sales to find a better promotion. They can also help sales calculate the lift for a promotion, and whether that sales increase – at that price – will make the promotion profitable. "It takes the subjectivity out of it," Grah says.
Critical to this service is that Fisher's staff doesn't need an entire weekend – or even an afternoon – to compute the data, including tens of thousands of time series calculations. When it took a long time to run data, information was released on a rigid schedule and was sometimes out of date. With SAS, it takes a few minutes to update information, so planners can publish as they update. "It's a better answer that gets out faster," Fisher says.
Achieving lasting ROI
Fisher says while overall forecast improvement is at four percentage points, some specific forecasting projects netted forecast accuracy increases of 7 percentage points or better.
With confidence in the forecasts, "People are letting that number drive through the whole organization, affecting what we produce, where we're going to ship, all the way up to our top-line financial commitments. This drives all facets of our business," Fisher says.
"With SAS, we're better able to accomplish our goal of right flavor, right time, right store," Fisher says. "It's hard to put a price tag on it, but it is really invaluable in terms of running the business effectively and better serving the customer."
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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Forecast demand for ice cream and pizza to lower inventory holding costs, improve service levels and assist sales in planning profitable promotions.
SAS® Demand-Driven Forecasting
Forecasts are four percentage points more accurate, service levels have improved; supply chain is more efficient and sales and demand planning work together to plan profitable promotions.
“"With SAS, we're better able to accomplish our goal of right flavor, right time, right store."”
Director of Demand and Supply Planning
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