Pastas Gallo

An Inventory Optimization Case Study

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Highlights
  • Dynamic environment with intense promotional activity and new product launches
  • Restructured supply planning process including procurement, production and internal stock replenishment
  • Achieved 99+% global customer service level while reducing inventory

Project and Objectives

Gallo was faced with a changing business environment, both internally and externally. Externally, distribution was becoming increasingly concentrated and services were being centralized. The distribution network was changing from a branch-based model to one focused on Logistics Operators.

Internally, there was significant growth in the number of rush orders to be handled. In a decentralized production planning environment, Gallo was feeding more inventory into the various nodes of the network in an attempt to sustain desired customer service levels.

The recent introduction of SAP R/3 ERP had also triggered changes both process and organization changes.

Gallo concluded that their supply chain would continue to undergo change; so the logistics and manufacturing networks needed to be dynamic and flexible enough to adapt quickly. They undertook a project to restructure the company’s supply planning process (including procurement, production and internal stock replenishment), synchronizing the company’s different business departments and taking into account marketplace events and operating constraints. The system had to focus on attaining required customer service levels across the entire organization, looking at the operation globally.

Gallo decided on ToolsGroup’s SO99+ solution because of ToolsGroup’s expertise in inventory optimization for demand-driven supply chains. Functionally, SO99+ was dynamic enough to adapt their business model and it used customer service levels as the driving force for the inventory optimization process. Technologically, it integrated easily with their SAP ERP platform and required modest technical resources to implement. Additionally, they found the introduction time short and the software easy and intuitive to use.

Day-to-Day

The system addresses about 500 items, three dry products production facilities and three distribution centers (DCs), plus an external distribution network managed by logistics operators for capillary deliveries. In total, SO99+ manages daily replenishment for about 2500 SKU-Ls. The system supports a dynamic environment with intense promotional activities and new product launches and is especially good at reacting quickly and adapting to changes in both the marketplace and the distribution network.

Results & Benefits

Within just five months following SO99+’s introduction and continuous use, Gallo successfully centralized the inventory replenishment process, raising its global customer service level to 99% and reducing inventory by approximately 10 days coverage. They also attained benefits in other areas, including:

  • Manufacturing - Drastic reduction in requests for emergency changes to the production schedule
  • Sales - Increased involvement and coordination in the planning process and improved forecasting quality
  • Logistics - Reduced need for external storage resources for finished goods and increased flexibility and adaptability of models when confronted with change

After reallocating capacity and continuing to grow their logistics network, Gallo achieved almost perfect service levels with less overall inventory. Service level (measured as available stock) reached 99.74%. Even including operational impact (preparation, transportation, etc.), the overall service level hit 99.25%.

Finally, SO99+ is impacting on the following processes:

  • Defining production and distribution plans – assigning customers to distribution centers and factories, depending on production capacity and transportation costs
  • High degree of task automation and management by exception, reducing demand planning and replenishment to slightly more than one full time equivalent (FTE)
  • Collaboration with suppliers, giving them visibility of short and medium term the needs purchasing needs
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With more than $250 million of annual sales, Pastas Gallo is Spain’s leading manufacturer and distributor of pasta products. They sell both dried and chilled food products (fresh pasta, ready-meals, and fresh sauces). Worldwide, Gallo Group now sells more than 300 million pounds of finished pasta product annually.

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