PREDICT ING DEM AND 22ADVICE. Improving the ability to predict future demands in a volatile marketplace NOTES FROM THE FIELD PIECES

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1 NOTES FROM THE FIELD VOLUME 2 PREDICT ING DEM AND Improving the ability to predict future demands in a volatile marketplace PIECES OF PEER 22ADVICE PRACTICAL ADVICE from food experts on solving critical issues.

2 WHAT IS NOTES FROM THE FIELD? To help food manufacturers with some of the key industry issues Columbus has asked the Food Community What advice would you give your peers to improve the ability to predict future demands in a volatile marketplace? Experts from our food manufacturing customers, our employees, analysts, consultants and partners from all over the globe have fed back either directly to Columbus or via our social media channels to give their Notes from the Field. We received hundreds of responses which were distilled into this document which we hope you will find useful and interesting. PREDICTING DEMAND Predicting the future is always fraught with issues and a volatile market place exacerbates the difficulty. It is critical for food businesses to be able to deliver the right product, in the right quantity at the right time. And with expiration dates on many food products the complexity becomes even greater. Customers expect products to be available when they want them and therefore there is a constant inventory balancing act. With a myriad of factors determining demand, organizations need to use all the resources available. In an extremely competitive market place the difference between getting this right and wrong can have a huge effect of the business.

3 NOTES FROM THE FIELD What advice would you give your peers to improve the ability to predict future demands in a Q:volatile marketplace? Demand management and a more mature sales and operations planning process can only be attained with having current generation advanced planning software which leverages the advances which have been made in using applied mathematics to the problem of synchronizing demand and supply. The fast eat the slow. To be fast, you must have visibility and flexibility which can only come from quick decision-making based on good information and supply chain modeling. PHILIP BRUNS, United States Know the economics of your business. Understand what will happen to its economics if you lose a major customer, for example. Adopt strategies to minimize your risk and plan your reaction if a high risk event happens. Use alternative sales forecasts DON TYLER, United States and use MRP to run scenario plans over this alternative demand. Prepare an action plan for when demand changes. CHRIS BRAISBY, United Kingdom The ability to link the sales forecast, capacity and purchase contracts against price indicators. Plan on more levels and handle the bottlenecks across business units. Recalculate prices based on a change in the price of raw materials with a time fence. CLAUS CHRISTENSEN, Denmark

4 Demand planning tools have become both more sophisticated, and easier to use. ERP systems have a rich store of data on sales history, but typically do not have statistical tools for analysis and prediction based on that history. However, it is fairly easy to pass that history off to a forecasting package that can find a best fit model and then forecast demand at multiple levels of hierarchy. So that sales forecasts can be looked at any grouping levels that make sense (location, customer group, product line, etc.). This forecast serves as a starting point for a collaborative effort to refine/adjust the forecast for new factors that will cause the future to be different from the past: new distribution channels, trade promotion plans, new products, etc. Once the forecast has been finalized, it can then be pushed back into the ERP system to drive the planning functions (Master Scheduling, Production Planning, and Purchasing). The payoff is better customer service with less inventory - which is huge! Many companies struggle in the area of forecasting, and don t realize the power of the tools that are available today. JIM BRESLER, United States Consider using end consumer sales data (from point-of-sale tills) as the basis for analysis and forecast generation. KEVIN BULL, United Kingdom Planning can be simple and very complex. The most important thing is to take all the factors that influence the supply and demand into consideration. A relative complex example could be planning done based on purchase, inventory, production and sales taking parameters such as catch weight, expiry date, as well as marketing campaigns and seasonal changes into consideration. A simple example could be that only some of these are relevant to your business. It depends on your business. JOHN PETERSEN, Denmark Plan based on historical trends, current order book and future forecasts. Some ERP solution hold this information centrally which allows for businesses to adapt quickly. 1. Analysis of historical data 2. Use of better forecast tools - even excel add-in like Data Mining will help ARVIND RAMESH, UAE MARTIN BURDEN, United Kingdom

5 If demand is volatile, ensure you can introduce new products very quickly and don t keep stock levels too high. WIM PLUIMERS, Netherlands Focus the sales forecast on short term and long-term forecasting. Also make the forecasting dynamic (for example, 2+5: the forecast expectations for the next 2 months and for the next 5 months), with the possibility to update monthly. ERNESTAS ZABURAS, Lithuania Our demands are fairly predictable so I may not be as stringent as others. I would keep a nine week fence and track forecast to sales using prior year as a base and allow for 3-7% growth. Climate affects our customers more than anything else. JON WELLS, United States Predicting the future is difficult, however by aligning sales and operations planning using order release management (delivery rules, wave planning and task management), you can counter this volatility to a certain extent. Predicting the future is always fraught with issues and a volatile market place exacerbates the difficulty. In businesses where there are short term windows of orders driven by large customers for a diverse daily product range it is all about data. For a food business providing baked products to large supermarkets the supermarkets order within the lead time of the product, meaning baking on a wide product range commences in advance of the order. Data is part of the solution here, but not simply product sold because the quantity is impacted by weather, public holidays, economic climate and a whole host of other influencers difficult to predict. However the data is critical, and year on year the more data the better the prediction. However this is not purely a statistical solution, the figures are presented and a human makes the judgement based upon all of the information available. In addition the structure of the product can ease the unpredictable nature. Creating structures with base batches that can be transformed into multiple products means the base batch can be made and when the order is known it can be transformed into the required final product. Management and analysis smooths the unpredictable volatile demands, but by the very nature of the demand you will never be fully in control of the supply-chain process, you can only try to limit the impact on your planning and execution. STEVE WEAVER, United Kingdom GUIDO VAN OSCH, Netherlands

6 Use market analysis. IMANTS SAKSS, Latvia Market demand management is a question for the marketers. Systems can help you to calculate the amount of products required according to historical data for a particular period, evaluating certain parameters (production or delivery time, expiration, inventory quantities in warehouse and in customer sales points) more conveniently and faster. The forecasting tool should be for the item group and not for a particular item. Use the historical sales data to create data cubes to use as the basis of forecasting future demand, allowing future calculated trends to be stored and managed, to give a logical view of how demand may change over time. RUTA GRIGIENE, Lithuania Invest in a modern ERP system with strong BI capabilities. PER CHRISTENSEN, Denmark Implementation of an efficient S&OP process is important to manage the supply chain taking both capacity and demand into the discussion. Enhance ERP with built-in, transactionally based forecasting. Ensure full integration between CRM and ERP. BJØRN PEDERSEN, Denmark HENRIK OXLUND, Denmark TONY CARLISLE, United Kingdom Accurate planning using min/max coverage group enables planners to run master planning and make the raw materials available just in time. Keep market data in your system so you have the ability to analyze at a later time. We actually added some additional fields to our market tables in order to have historical market information to analyze. NATASHA PIJUAN, United States SHAILESH GAJARALWAR, India

7 HOW CAN COLUMBUS HELP? COLUMBUS F&B Food and beverage companies have unique, wide-ranging needs that go well beyond standard Enterprise Resource Planning (ERP). Many food companies often struggle to pull together a system that fits with add-ons and costly customizations within their core ERP application. ColumbusF&B enhances core ERP capabilities to meet food-centric needs, and also builds in industry-specific features traditionally found only in third-party ecosystem solutions. Our goal is to deliver, and continuously enhance, an affordable solution that meets common requirements and scales and upgrades with minimal customizations. Our solution also includes the role tailored user experience, multi-language and multi-currency capabilities, and seamless integration with your IT infrastructure. Columbus enables you to meet customer demand, dissolve traditional barriers to doing business, and adapt internal procedures to create a lean, profitable environment now and into the future. BENEFITS 1. INTEGRATED SYSTEMS SMOOTHLY CONNECT ERP AND ENTERPRISE ASSET MANAGEMENT PROCESSES. The ERP system automatically triggers the maintenance system with critical production information. Enterprise asset management capabilities will then reserve the corresponding downtime on your ERP production schedule. 2. OPTIMIZE PRODUCTION SCHEDULING BASED ON PRODUCT PROPERTIES SUCH AS COLOR AND FLAVOR. ColumbusF&B integrates production and maintenance scheduling to optimize capacity utilization. 3. PAY ON GRADE AND QUALITY OF RECEIVED PRODUCTS. Settle payments to your growers and farmers based on actual product characteristics by automatically calculating the price based on quality data. Users can also adjust the base price and add charges or deductions. 4. MANAGE POTENCY WITH EASE AND FLEXIBILITY. View, value and work with potent items in inventory and formulas critical for organizations working in dairy, vinegar, wine, beer and spirits. Revaluate potent inventory and pay growers or vendors based on the potent content of their supplied materials or ingredients. 5. ELIMINATE MANUAL, OFFLINE PROCESSES FOR BATCH-BALANCING POTENT LOTS. Achieve desired potency targets with automated processes that let people view, select, blend, and balance lots while working directly in your ERP solution. The full ColumbusFood solution includes our best practice business process modeling with RapidValue, our own Food and Beverage and Supply Chain Solution modules, Microsoft Dynamics AX, and our proven implementation methodology, SureStep+.

8 A big THANK YOU to everyone who has contributed to the Food Notes from the Field including: Arvind Ramesh, Bjørn Pedersen, Chris Braisby, Claus Christensen, David Moodie, Don Tyler, Ernestas Zaburas, Geeta G. Cohli, Guido van Osch, Henrik Oxlund, Imants Sakss, Jim Bresler, John Petersen, Jon Wells, Josh Sanders, Kevin Bull, Lisa Hammond, Martin Burden, Martin Clothier, Mike Greenway, Natasha Pijuan, Per Christensen, Philip Bruns, Ruta Grigiene, Shailesh Gajaralwar, Steve Weaver, Svetlana Kondakova, Terry Coult, Tony Carlisle, Tony Farr, William Lloyd and Wim Pluimers. The ColumbusFood Notes From The Field Series: Volume 1 Volume 2 Volume 3 Volume 4 Volume 5 Volume 6 Product Recall Predicting Demand Perishable Items Supply Chain Business Processes Food Safety For more information on Columbus, our clients experiences and our solutions, please visit ABOUT COLUMBUS: Columbus is the preferred business partner for ambitious companies worldwide within the food, retail and manufacturing industries. We exceed 20 years of experience and successful business cases, and we re proud to offer our customers solid industry know-how, high performance solutions and global reach. Columbus is a part of the registered trademark Columbus IT