Talking better product launch and allocation decisions with Ferrero USA

Aug 21, 2020  |  6 min read

About Ferrero

If you’ve eaten candy in the past year, there’s a good chance Glenn Lawse was responsible for getting it to you. As Vice President of Supply Chain at Ferrero USA, Glenn and his team keep the shelves of American retailers stocked with confections like Tic Tacs, Butterfingers, Crunches, Nutella and Ferrero Rocher pralines. 

But you may not have heard how bridging the gap between planning and execution has revolutionized Ferrero’s supply chain, like the spoils-related use case that sported a return at least seven times the investment.

Glenn recently sat down with Logan Ensign, Director Client Solutions at Alloy, to discuss that and other successes enabled by connecting real-time POS and supply chain visibility.

Some of Glenn’s main takeaways are below. But watch the entire 50-minute webinar, A sweet deal: How global confectioner Ferrero takes a bite out of supply chain issues, to get all the details – including how he brought other cross-functional stakeholders on board to deliver even greater value to the organization. 

Beware the gap

The COVID-19 pandemic may have highlighted the need for supply chain resilience and responsiveness, but surprises – and subsequent firefighting – are really an everyday occurrence. According to Glenn:

The reality is, even outside the pandemic…we don’t always get information fast enough to have visibility to make the right decisions. We have a lot of partners we work with… they all have their own bits and pieces of information, and trying to make sure you make the best decision with all that information is very hard to achieve.

Poll results

His experience is hardly unique:  82% of responding webinar participants said they dealt with an unexpected change in customers’ orders at least once a week – and 39% said they weather those changes daily. When that gap between forecast and sell-in arises, it often means multiple meetings, data gathering and investigations to understand the root cause and how to best respond.

Supply chain data comes from numerous sources and in varying formats, both internal (including ERP, consensus demand plan and business intelligence) and external (including planning from each of your distributors and retailers,  POS data and other partner-specific spreadsheets). Manually matching up all the different product identifiers and stitching the reports  together to understand what’s happening in your supply chain can’t happen quickly enough to be helpful. 

“Typically, you end up firefighting… it becomes inefficient, it’s very frustrating,” Glenn admits. But things changed when Ferrero USA engaged Alloy to help connect the dots. 

Key Takeaway: There’s a huge gap between having data “available” and being able to use it to quickly make the best decisions.

Ferrero’s experience: New product launch

As they introduced a new product to the U.S. last year, Glenn had to make a high-stakes decision about whether to increase production. It was manufactured in Italy, so if the right action wasn’t taken in time, Ferrero could be facing unfulfilled orders and out-of-stocks or expensive expedited shipping. 

The Walmart customer account team looked at their data and recommended pushing more product based on a recent increase in sell-in. But the problem, as Glenn says, is:

Sometimes a single piece of information, which is that something’s selling really well or conversely, unfortunately something appears to not be selling really well, doesn't really tell you the full story. You really have to bring a number of pieces of information together to make a good decision.

To make the right call, Glenn cross-referenced this data point with others already integrated and connected for him in a single dashboard: 

  • Walmart’s own forecast
  • Walmart’s real-time inventory position and scheduled shipments
  • Walmart’s real-time POS Alloy dashboard

He could quickly see that Walmart already had a very healthy pipeline and no reason to order more beyond what was already planned. Deciding to not respond saved them headaches later, when they would have been saddled with unproductive inventory.

Key Takeaway: The right decision often requires triangulating multiple pieces of information to connect demand and supply.

Ferrero’s experience: Seasonality and mitigating waste

Seasonal product

When it comes to food, spoilage is always a concern. On top of that, Ferrero produces many seasonal products – a Christmas tree-shaped box, for example, where demand drops the day after the holiday. It’s a challenge folks across many industries can relate to.

Here again, Glenn says connecting POS visibility and inventory information is critical, particularly in real-time:

Watching not only after the event has happened, but on the way into the event... Real-time inventory and turn information to connect the dots about where it is that I'm likely to have spoils. And can I do something? Can I work with that retailer earlier to move the product faster?

If Ferrero sees early enough that product isn’t moving well, they can talk to the retailer about how they can improve it – while the opportunity still exists. For example, can they offer a markdown in the last week or two? Some profit may be sacrificed, but it saves them from destroying product at the end.

More generally, Glenn’s team uses real-time insights into distributor and retailer pipelines to pinpoint when partners have too much (or too little) inventory, based on the downstream point-of-sale. That information helps them drive better conversations, either internally cross-functionally or with customers, to prevent unnecessary orders and waste.

Key Takeaway: Real-time POS data empowers supply chain to drive better stakeholder discussions, resulting in lower spoilage, higher turns and better customer experiences.

Ferrero’s experience: Demand spikes and allocation

During the pandemic, Nutella has seen a dramatic increase in consumer demand that Ferrero just can’t meet. Although it’s a good problem to have, it requires making supply-constrained decisions about who’ll receive it. The question for Glenn then becomes: “They're all ordering, but who really is sitting on the supply, and who has zero or major in-stock problems at the retail level?”

In situations like these, it’s critical that they dig deeper to prioritize orders and fulfill not based on who’s the bigger customer or what orders come first, but who really needs it. 

The ability to have immediate visibility into [partners’] inventory is one level beyond anything we’ve had in the past… maybe we used something else that told us POS generically at the end state, but to not be able to tell what's happening up and down that supply chain really puts you at a disadvantage.

What’s more, while it’s common to talk about a customer as a single entity, it’s actually of course many stores and distribution centers. For example, Walmart may need product, but Ferrero can see if it’s only in certain areas of the country, which have both the highest sales turn and in-stock problems. They can then use that granularity to make smarter allocation decisions.

Key Takeaway: Asking the “next question” and analyzing data at the most-detailed levels leads to precise answers that maximize service and sales.

Supply chain management is just the start

Although Glenn’s focus is supply chain, his experience with Alloy shows that real-time, harmonized data that brings together supply and demand promises benefits throughout the organization. His priorities are reducing waste, reducing lost sales and improving on-shelf availability, but he recognizes that there may be an entire set of sales applications that are just not natural to his language.

It has tremendous value for supply chain, but supply chain value…tends to be more around prevent, and prevent is not a good business problem. You want to add or increment, which is truly a sales problem.

In fact, when Ferrero first started working with Alloy, the users were about 75% supply chain and 25% sales. Now a year later, it’s probably 50-50, and they’re looking at how it could be relevant to trade marketing as well. For Glenn, the beauty of it is that “the tool doesn't have to be everything to everybody. It can be X for one set of people, Y for another set of people, but it’s all running the same data in the background.”  

In fact, Glenn’s finance partner reviewed their business case and said the cross-functional visibility alone pays off the investment. New use cases will continue to provide more ROI on top of that.

Learn more about Ferrero USA’s journey – including how to get started and drive adoption – by watching the entire webinar here.

Posted by Alloy