Business intelligence systems enabled Burton's Biscuits to see it
was carrying 20% too much stock.
Business intelligence systems enabled Burton's Biscuits to see it
was carrying 20% too much stock.
Dave Travis, MIS development manager at Burton's Biscuits, has
no doubts that his company's SAP ERP solution is key to his
company's day-to-day operations. But he also knows that Burton's
wouldn't run as efficiently and effectively if it wasn't for a
suite of business intelligence applications that pick up where SAP
ends.
These applications, created using Seagate Software's Holos
running against an Informix-based data warehouse, have given the
Burton's board a bird's-eye view that has allowed it to make
fundamental changes to the way the business operates. While Holos
has been applied to a number of business issues, a key area has
been inventory and warehouse management.
Burton's Biscuits, part of Associated British Foods, produces
more than 100,000 tonnes of biscuits each year, as well as a range
of sugar confectionery. Best known for brands such as Wagon Wheels,
Jammie Dodgers, Viscount and Royal Edinburgh Shortbread, Burton's
is also a major supplier of own-label products and boasts a
turnover of more than £200 million. It employs around 2,500 staff
at three factories producing some 800 product lines.
In the past, Burton's managed its warehouse and finished goods
inventory in a very traditional fashion. Its policy was to carry
cover for a certain number of days for each line. Every week, its
site managers would go round the warehouse identifying any batches
of stock that needed to be quarantined because they couldn't be
sent to customers. The main drawback of this approach was that it
meant stock was managed at a very local, granular level; issues
with quarantined stock were seen as a series of small problems.
What the Holos applications did was raise the issue of quarantined
stock at board level and force the board to ask fundamental
questions about the way the business operates.
Travis explains that the typical shelf life for biscuits is 24
weeks. Burton's aim is to shift them out of its own warehouses in a
quarter of that time. However, even though Burton's has six weeks
to sell a product, it shouldn't need to carry six weeks of stock.
The key breakthrough came when Burton's used the modelling
capabilities of Holos to ask what was the "ideal" level of
inventory it would need to carry to deliver good customer
service.
The model revealed that the traditional "x days cover" approach
meant the company was carrying 20 per cent more inventory than it
needed to. This headline figure raised the profile of the issue
from a series of small problems with individual lines to a
fundamental flaw in the way the company operated. Once Burton's
board understood the issue, it was not only motivated to act but
had the power to introduce radical measures.
Over a three-month period, these measures reduced stock to the
"ideal" level. For example, the company discovered that it was
holding stock for which there was no demand (perhaps because an
export order had been cancelled). Tucked away in the corner of a
warehouse, the stock was simply stagnating. One solution was to
generate demand for it through carefully focused promotional
initiatives that would clear it out in four to six weeks. Another
tactic was simply to destroy it, since it would be cheaper in the
long run than tying up storage space. Following this initial burst
of activity, Burton's has continued to use Holos to provide views
of its business, which ensure static stock doesn't return.
By reducing its inventory to the "ideal" level, the company has
reduced its requirement for working capital and made some long-term
savings through ending its contract with one third-party warehouse,
reducing the space it uses in another and changing the way it uses
contract storage services altogether.
Burton's is now attempting to apply the same logic to its raw
materials inventory. "Inventory is a cost of delivering customer
service and the inventory we hold will affect our ability to
develop relationships with customers," Travis explains. Most of the
company's bulk raw ingredients - such as flour - are delivered on a
just-in-time basis, but the company also stocks a number of
high-value elements such as packaging. The next phase will ensure
Burton's is not storing static inbound inventory, such as obsolete
packaging, and that it holds the right levels of the inventory to
meet demand from its customers.
Summary
The problem: How to use the wealth of data collected in
an ERP system to identify systemic weaknesses in warehousing and
inventory management procedures.
The solution: A business intelligence tool which models
the "ideal" stock needed to serve customers and compares it with
actual stock to root out obsolete stock and overstocking.
Burton's Biscuits' solution allows it:
- To gain a bird's eye view of major systemic faults, which were
previously managed through the ERP system as a series of small
problems.
- To use a single virtual business model (devised independently
of the software tools) as the basis for numerous
applications.
- To manage by exception rather than by laboriously checking
through every record.