PARSIPPANY, NJ. — Ferrero USA, Inc., a subsidiary of Ferrero Group, is leveraging technology to become more demand driven.
The maker of Nutella, Tic Tac and Ferrero Rocher last year partnered with Alloy, a data platform for consumer goods brands, to bring more visibility to its supply chain and optimize on-shelf availability.
The result has been improved predictions on store-level out-of-stocks and phantom inventory, reduced overstock and returns, stronger retailer relationships and more strategic collaboration, said Glenn Lawse, vice president of supply chain.
“Reality never matches the plan,” Mr. Lawse said. “Certainly the macro environment with the pandemic has had significant impacts, but even outside of the pandemic, what we were looking to have Alloy help us solve is the fact that we don't always get information fast enough or have visibility fast enough. Supply chain sits in the center between marketing and sales and finance. They all have their own bits and pieces of information and trying to make the best decision with all that information is sometimes very hard to achieve.”
A significant portion of Ferrero USA’s business goes through distributors, who have their own planning systems for inventory levels and stock management.
“They’re in turn talking to retailers, but that is not necessarily part of the same system,” Mr. Lawse said. “So, you have three separate planning systems before it leads into the point where you're actually doing your production planning.”
Translating from one retailer’s language to the company’s internal language is another challenge. Retailers may have their own stock-keeping unit (SKU) numbers that must be translated back into the company’s internal number for planners to know what they’re looking at.
“Not only that, you have to do that same translation for multiple partners and try to understand across them, so it’s a very difficult task,” Mr. Lawse said. “You end up firefighting. You're trying to pull inventory. You've got inventory, it’s in the wrong place. You've got inventory, it’s the wrong code. The plans that you designed to sell one set of products turns out to have demand on another set of products.”
Alloy’s platform helps overcome those challenges by collecting and syncing data in real time across a variety of sources, including brick-and-mortar retailers, e-commerce channels, distributors and more.
Once collected, the data is harmonized into a single model, and the information is used to create a network of the supply chain.
“We're modeling the relationship between your partners and their locations and your locations, so that you can trace your products all the way from your production facility through your internal distribution centers, through your distributors’ distribution centers, all the way down to stores at the point-of-sale,” said Logan Ensign, director of client solutions at Alloy.
Once all the data is integrated and modeled, Alloy’s platform enriches it by computing and simulating metrics. It calculates weeks of supply, shows where there’s potential for phantom inventory and projects inventory shortages at any point in the supply chain. It also generates demand forecasts that translate into shipment plans.
“We can illustrate to you the sales that you've lost from product not being on the shelf, so you can better understand what is true, unconstrained demand at the point-of-sale,” Mr. Ensign said.
The platform has helped Ferrero USA meet surging demand for Nutella during the coronavirus (COVID-19) pandemic, Mr. Lawse said.
“Nutella has been selling like hotcakes,” he said. “We have been selling more than we can possibly make. When we can provide more information, it really helps. We can dig down and say, ‘They're all ordering, but who really is sitting on the supply and who has major in-stock problems at the retail level?’”
The platform also has helped the company better manage product launches.
“Many of our products are manufactured in Italy, which obviously lengthens our supply chain and decreases our reaction speed significantly,” Mr. Lawse said. “New products don’t have a history, so you're maybe modeling it after something else. Then you have sales coming in to say, ‘That thing is going gangbusters, we need to make more product.’ Pushing more product with something coming from Italy could mean an airplane, so this could be really expensive.”
As an example, Ferrero began receiving signals heading into the Easter holiday that it needed to make a massive increase in production for a new product.
“That was going to drive a tremendous amount of extended cost,” Mr. Lawse said.
Alloy’s platform used point-of-sale visibility, information on actual shipments, sales forecasts and data on how many weeks of inventory retailers were sitting on to confirm all channels had sufficient weeks of supply.
“Sometimes a single piece of information — something’s selling really well or maybe not selling well — doesn't tell you the full story,” Mr. Lawse said. “You have to bring a number of pieces of information together to make a good decision. Having that single source of truth, one place to go to be able to see all of this information, was really key for us.”
Ferrero USA has been working with Alloy on several major customers, and the platform currently collects data from around half of the company’s shipping points. The upcoming year will see the platform expand to more user groups within the company.
“The same information has different value to different functions for different reasons,” Mr. Lawse said. “If you think in terms of functions departments, last year was mostly supply chain — I'll call it 75% supply chain, 25% sales. Now, it's probably 50-50. Going into next year, there may be some folks in marketing who are looking at this, or trade marketing.”