Case Study: Managing supply and demand for fresh produce
For suppliers of perishable items with a short shelf life, managing the peaks and troughs in supply and demand is key to running a profitable business. Supplies cannot be stockpiled, so a surplus will either go to waste or be sold off cheaply, whilst a deficit results in unfulfilled orders or creates the need to buy emergency stock at short notice. Either of these scenarios can seriously harm the profitability of the business.
However, whilst fresh food producers are subject to the same sorts of variation in demand experienced by other businesses, the nature of their product generally means that it is rather harder to manage supply than in other industries. Fruits and vegetables take time to plant and grow and will tend to come into maturity at certain times of the year. Farmers cannot easily ramp up or turn down production at short notice. For this reason, having a good forecast of both supply and demand is vital.
For a major supplier and packer of fresh eggs, we used Compas to build a supply and demand management tool which allowed them to construct a detailed forecast of supply by size and type of egg over the next two years, and to compare that with their sales forecast to identify any periods with significant surpluses or deficits. Complexity was added by the fact that some eggs may be substituted by other eggs of an equal or higher quality, but others may not, so the system needs to have a good understanding of the substitution rules.
The production forecast is built up from the individual flock level using a set of laying profiles which have been uploaded or generated by the system. Anticipated changes, such as the gaining of organic accreditation, can be planned in, and are used when building the forecast. As well as providing detailed forecasts of supply, demand and the balance between the two, Compas also generates financial forecasts and provides a comprehensive set of reporting tools. Farms where production is significantly above or below what is expected are identified, allowing adjustments to be made to the forecast, and remedial action to be taken with the producer, if necessary.
As with other Compas implementations, the system blends actual data to date with forecast figures for future time periods, allowing the business to see an up-to-date full year view at all times. Also, automatic snapshots of inputs and forecasts are taken each weekend, allowing the current situation to be compared with the forecast from a week or a month ago, and providing the ability to see exactly what has changed between the two.
Prior to the implementation of Compas, this was all being planned in Excel, which was time-consuming, isolated from other systems, and could not go down to the level of detail required by the business. Many linked spreadsheets, each with multiple tabs, were involved in the planning process, meaning that making changes was a risky process, even for the person who created them. With Compas, new products and customers are loaded automatically from company systems. Forecasts are updated as soon as any changes are made to the plan, and are instantly available to anyone in the organisation.