A Global Taste Ingredients Company Begins a Difficult Supply Chain Journey

A central process in supply chain management is balancing supply and demand in both short and longer term planning horizons. Sales & operations planning (S&OP) is the process that helps companies achieve these goals in a way that lowers costs, improves service, and increases sales and margins. But implementing an S&OP program is never easy. Just ask Mark Elter, Director of Supply Chain – Dairy & Culinary/Meat at Kerry.

As Mr. Elter’s job title would imply, Kerry is a food and beverage company. But Kerry actually makes most of their revenues from taste and nutrition solutions – a “solution” could combine taste ingredients, consulting know-how, and perhaps customized research and development. These solutions are provided to food, beverage, and pharmaceutical companies. The Kerry Group, headquartered in Ireland, is a global company that achieved more than 6 billion euros in revenues last year.

As Mr. Elter’s job would imply, Kerry is a food and beverage company. However, this global leader in Taste and Nutrition is more than just an ingredient supplier. The company provides taste and nutrition solutions to their customers developed through their research into culture, life stages and related nutritional needs together with expertise in the science of taste. Kerry, with North American headquarters in Beloit, Wisconsin is part of The Kerry Group, a global company based out of Ireland with more than 6 billion euros in annual revenues.

Kerry is implementing the S&OP process throughout the company. Mr. Elter spoke about the journey his business unit has been working through. His unit, headquartered in Beloit Wisconsin, is composed of twelve plants in the Americas that manufacture meat seasonings, coatings, and powdered creamers and cheeses. The Beloit office has ten supply chain professionals with a variety of responsibilities. Each plant has a materials team with 3 to 5 people who are in charge of insuring that the company produces what customers need. These groups, Mr. Elter said, “have done an excellent job of balancing supply and demand over the short term – the next month or two.”

Kerry Americas Headquarters in Beloit Wisconsin

But a sales and operations planning process was needed because Kerry is growing, and both the company and all the business units need to do a better job of “getting ready for growth.” The Taste & Nutrition group that this business unit reports up to reported that volumes grew by 4 percent last year. In a company that generates billions of euros in revenues, four percent unit growth can lead to constraints in production without a robust planning process. In particular, this business unit’s spray drying and dry blending machinery needs to be carefully scheduled. A process was needed to project demand out over the coming months – and eventually years – and insure the capacity will be available to meet projected demand.

2015 was the year the foundation was laid for a S&OP process. Data needed to be cleansed. Further, standard settings needed to be configured in the production and supply chain applications so that standard reports could be generated. “But,” Mr. Elter explained, “the biggest thing was ‘cleaning the data.’ If we got to the first executive planning S&OP session and data debates broke out, then people would no longer want to participate in this process.” After all, this is a process that will demand many busy supply chain professionals attend an extra four meetings per month. Participants need to experience early wins and see the value of this time commitment.

This was far from easy. It took six months, for example, to get the spray drying machines throughputs and usage reporting correct.

To do a better job on the demand planning side, their strategic business unit implemented a new demand management solution from Demand Solutions. They also made extensive use of a consultant to insure that planners could plan effectively and insure that all planners – across all business units – were planning the same way.

“Establishing a standard planning process on the supply side has been more challenging. This is still a work in progress.”

But, the S&OP process has forced the supply chain team to look closely at which factories are producing which products. Historically, when the unit got new business, they would look at which plant should be the primary plant used to produce that product for the new customer. But business volumes and plant capabilities can change over time. “It may be more efficient to product that product in a different plant today.”

This process of balancing supply and demand profitably requires that the plants’ cost of production and throughput capabilities, and the cost to transport product to the customer, all be understood.

The plants in this group have improved service levels. They have also generated new efficiencies surrounding capacity utilization; they have less machine down time and less overtime. “But I can’t totally attribute these improvements to the S&OP process,” Mr. Elter explained. Now, as part of the S&OP process, when a “pinch point” is looming on the horizon, the group looks to see whether they need to buy new machinery, if production can be shifted to other plants, or whether a continuous improvement project can free up capacity. The S&OP process and continuous improvement projects have worked hand in hand to improve Kerry’s throughput capabilities.

While Kerry has already achieved significant benefits from this new process, they are just at the beginning of their journey; much more can be accomplished. At Innovation Enterprise’s S&OP Innovation Summit in Las Vegas on January 25th and 26th, Mr. Elter and Brian Moynihan – who is also a Supply Chain Director at Kerry – will speak in more detail about Kerry’s journey. They will share their goals for improving their process further by addressing additional people and talent issues; further refining their S&OP process; and the types of technology they are considering implementing to provide additional decision support.

While Mark and Brian will present on the first day, I will be the Chairperson on the second day and also moderate a panel that afternoon. I hope to see you there.

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