Findus’ private equity owners believed the company was holding too much stock, tying up working capital that could otherwise be used for new investments and improve the company’s value. The company worked hard to solve this, but its systems weren’t up to the job.
Erik Börtemark, Supply Chain Director, Findus Sweden AB, explained, “After making theoretical safety stock calculations for each SKU in Excel, we fed the data into our ERP systems. This was quite a slow, manual process and the numbers we generated were very rough. We only updated numbers twice a year – not enough for a fast-moving consumer goods environment like ours where many SKUs are regularly replaced.”
Börtemark’s team manages the supply chain for Sweden and Denmark and also handles replenishment to Finland, Norway and France. It carries 800 finished goods items (20% replaced yearly) and 2000 raw material SKUs. Findus’ distribution network includes four factories, 23 production lines and one distribution center. Products reach four channels - retail, food service, industrial and international.
Without a good system in place, Findus struggled to balance the conflicting demands of investors, customers and employees. Like many food manufacturers, Findus often favoured service levels to meet the tough demands of their customers. This often meant holding artificially high safety stocks to ensure availability, which didn’t sit well with board members.
The supply chain team knew that to justify investing in a more robust, modern planning system, it would have to address their investors’ concerns. The team prepared a business case with the goal to cut SKR 10 million ($1.25 million) or roughly 10 percent of finished goods inventory cost. Satisfied, the board then gave the go-ahead to invest in new software.
According to Börtemark, “We chose to implement ToolsGroup’s SO99+ software with our trusted, local partner Optilon. Both had proven track records in optimizing inventory for consumer goods companies and came with strong references.”
Optilon and Findus started by building a full-scale pilot that successfully went live in just four months. After a few months of additional building and testing, SO99+ was moved on premise.
One person has chief responsibility for managing the SO99+ system and roughly 15 people in Sweden and Norway contribute their planning input. Members now update and control Findus’ safety stocks levels every month, rather than every six months. Crucially, the new system has allowed the team to change from a ‘one-size-fits-all’ channel strategy to treating each channel differently according to its unique demand patterns, volumes and other properties.
Findus pulled off the difficult task of satisfying its investors, customers and unexpectedly, its employees. The company beat its original goal to cut inventory by more than 10 percent, reducing working capital requirements by more than SKR 20 million.
Once the results made it clear to the board that service didn’t have to come at the expense of capital, Findus’ supply chain team could revert from its goal of freeing up working capital back to prioritizing service levels. This allowed them to grow service levels significantly, especially in the retail channel – from 96 to 98 percent.
The new SO99+ system also made for a happier, more engaged planning team. Börtemark explains, “With the benefit of reliable, up-to-date data, we treat inventory in a totally different and structured way. Members find it much more satisfying and even fun to work with this data because they know it’s going to be used somewhere, and they get immediate feedback. Also, because they don’t have to spend all their time manually crunching numbers, they’re freed up to engage in more valuable work.”