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.
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: