FORECASTING SUCCESSFUL PROCESSOR INVENTORY MANAGEMENT

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1 FORECASTING SUCCESSFUL PROCESSOR INVENTORY MANAGEMENT Sunday, July 10, 2016

2 OBJECTIVES Importance of Forecasting to Successful Inventory Management. The Importance of Proper Communication Roles Everyone Has in the Process Maximize Dollar Value of USDA Foods

3 STATE PERSPECTIVE State Responsible For Processor Inventory Managing From Behind Be Proactive

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5 STATE POLICIES Sweeps Use Or Lose Reallocation Internal Transfers

6 THE PLAN Planning is Great Must Be Adjustable Timing Is Wrong

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8 Managing Inventory Resources Menu Changes Utilizing Data Entitlement Carry Over Communicating Results

9 Round Table Discussion Recap Limited resources to forecast properly Utilized previous years data Notified distribution of menu change 2/3 weeks prior to menu cycle Orders turned into distribution 2 weeks in advance of delivery Secured commodities by utilizing last years historical information Less than 10% utilized a resource tool to forecast commodities

10 National Bid ReCap ESTIMATED BIDS NATIONALLY 2,425 37% - BLANKET BID PRICING 40% - ESTIMATED VOLUME LISTED 3% - DIRECT TO WAREHOUSE (OTD) 1% - LISTED ESTIMATED MONTHLY VOLUME 68% - BID AWARDS RECEIVED *28% OF THOSE AWARDS HAD ZERO ESTIMATED VOLUME

11 Managing Inventory

12 Improving the Process Standardize bid requirements Stakeholders and the sharing of information Communicate Bid Award Results Utilization Increase/Decrease +/- 10% Discontinued/New item sku s Menu Revisions Commit to Inventory Par Levels Back up Plan

13 Before visiting the school, determine the enrollment and ADP of the district. Is the District participating in CEP? If so, how many years have they been doing it? Review the posted school menu s. Are they running on a 3 week, 4 week or no cycle?

14 When helping the school determine the amount of commodity to divert, please do the following: Determine what they have diverted in the past. Determine what they actually used in the past. Based upon their ADP and menu cycle, how much commodity do they need to divert. How much entitlement does this diversion effect?

15 Once you have the diversion volume, develop a forecast with the input of the district Find out how much volume they need BY ITEM, BY MONTH. Are they doing Fee for Service or are they doing NOI? If NOI, what distributor will they be using? When will they begin school and when will the first order need to be there? Does the school have ample funds to pay the first order in the established payment terms? Share the forecast with the broker and the distributor.

16 Child Nutrition products are developed for schools. Outlets to sell excess inventory are limited. If have to sell outside of the school market, will typically get pennies on the dollar. As Forecasting becomes better, cost savings are realized. Less Excess inventory is carried at both manufacturer and distributor. Cost of capital decreases thus resulting in better pricing for the end user. Forecasts are being asked for all segments, Grocery Stores, Fast Food, Distributors, etc.

17 In late Fall, analyze sales versus the forecast that was provided. If adjustments need to be made, do so and let all parties (including distributor) know about the changes. Forecast is based on numbers provided by the district. If the district modifies the menu cycle without giving adequate lead time, then shortages are possible. Offer Recipe ideas or Menu concepts that have been successful at other school districts.

18 Bids must include an accurate realistic volume. If no quantity is listed, bid becomes less desirable from the manufacturers point of view. Once a forecast is updated, it realistically takes 6 weeks before production can increase the level of inventory on hand. Adjustments for the forecast should include both increases and decreases. Helps a manufacturer and Distributor allocate time and space more effectively.

19 If another manufacturer is experiencing issues, if school switches to another brand, then either the distributor or the school needs to notify the broker or manufacturer of the change so that forecasts can be modified. Assuming that distributors or manufacturers have an endless supply of product leads to shortages and anger.

20 CONTACT INFORMATION Mike Birkmeyer Jack Crawford Ken Woodburn

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22 THANK YOU FOR ATTENDING