Del Monte Foods and Shelf-Level Collaboration

Last year, I wrote a strategic report on shelf-level collaboration–i.e., on how manufacturers can help retailers achieve a better in-stock position for their products. As part of my research, I asked suppliers of Demand Signal Repository (DSR) solutions for references at client companies they believe are doing an excellent job in this area. I also reached out to executives at many consumer goods firms and consultants active in this area. I concluded that many companies had initiated pilot projects, but very few had made significant improvements. There were many examples of individual divisions collaborating effectively with individual retail companies, but very few examples of companies that had been able to scale those efforts across all product families and multiple retailers. The exception was Del Monte Foods.

What made Del Monte best in class? The company improved its on-shelf positions significantly — to a better than 98 percent in-stock shelf-level service level. Del Monte did this across all its products at one core retail partner, and across all pet food products at a second key account. The company achieved this while simultaneously lowering supply chain operating costs and lowering inventory levels — not just for itself, but also for its key retailer partners. Two of these key retailer partners achieved positive operational cash outflows, where product is flowing to the consumer at pace or faster than its payment terms with Del Monte.

So, we were delighted when Bill Pollard, the VP of Customer Service and Transportation at Del Monte, agreed to present at ARC’s “Beyond the Perfect Order Metric” forum in Orlando this past February. When I wrote the initial report, Del Monte highlighted the following points as key enablers of its improved performance:

1. Del Monte made becoming a “demand driven” company a core corporate strategy. C-Level executives pushed the initiative in an aggressive, top-down manner, emphasizing alignment across all groups — marketing, account teams, the supply chain teams.
2. Del Monte uses downstream data to improve its forecasting. The company forecasts what individual stores at its key retail partners are likely to order and aggregates this up to the higher-level enterprise forecast. This greatly improves its ability to forecast promotional lift.
3. Del Monte began a lean initiative at its factories to enable it to produce to more dynamic demand streams.
4. The company improved the systems and processes in its warehouses.
5. Del Monte practices dynamic replenishment. It has inventory visibility all the way from its factories to key retail partners’ stores. This, combined with the company’s ability to project store orders, allows it to differentiate between true new demand and shifts in order timing that may skew statistical demand forecasts.
6. At Del Monte’s most important accounts, account teams and supply chain teams reside in the same cities where its core retail partners have their headquarters. The upgraded account teams have been taught how to use analytics and work more effectively with the embedded supply chain teams to sell shelf-level performance as a competitive advantage. They can show how this kind of performance improves the retailer’s revenues, cash flows, and profits. The company’s core growth plan revolves around being “demand driven.”
7. By modeling and managing the integrated supplier/retailer supply chain, Del Monte’s key account teams identify incorrect and inefficient store-level replenishment settings and communicate their findings to their retail peers.

During his presentation at the seminar, however, Bill stressed that moving from mid-pack to top-of-pack performance was a journey that took the company five years. In addition to the lean initiatives at the factories, improved demand planning, and improvements in warehouse capabilities, he mentioned improvements Del Monte made to its monthly S&OP process. Without building its base capabilities, the company could not have successfully made use of DSR technology to improve shelf level performance. Bill also mentioned that the two key metrics that drive their supply chain efforts are in-stock performance – as defined by their retail partners – and inventory levels. Del Monte is holding 27 percent less inventory in its warehouses even with the increased store performance. For one of its key accounts, Del Monte measured the baseline inventory, began the demand-driven supply chain program, and then measured inventory at the retailer’s warehouses at the conclusion of the effort. The company took 44 percent of its inventory out of the retailer’s warehouses.

Del Monte accomplished its objectives using a best-of-breed technology stack. One key component of the stack is One Network. This multi-enterprise execution management solution provides the company with extended network visibility and optimization. It uses store-level POS and inventory information to drive demand-driven forecasts and activity. It uses One Network for dynamic transportation planning and for scheduling carriers into its DCs, and to make dynamic replenishment allocations. The other key DSR component is Vision Chain, which Del Monte uses as its repository for downstream data and for generating analytics for its account teams.

Other supply chain components include a best-of-breed Warehouse Management System, i2 Demand Planning (now JDA Software), and Siebel (a product from Oracle) for Promotion Planning.

But the journey to become demand-driven is not over. The company has recently initiated a new program to use merchandising alerts to identify out-of-stocks (OOS) and phantom inventory. Any of these conditions triggers its customer team to contact field operations to work with the store managers in the field. In its journey to date, Del Monte has greatly improved its supply chain from its factories out to the stores. Now the company wants to use these technologies and provide downstream data to its suppliers, at no cost to the suppliers, so that it can achieve a demand-driven supply chain end to end.