Problem
Sunsweet Growers is the world's biggest producer of dried fruits and a little over a decade ago, found that while it was managing distribution operations well, high production costs were inating end-to-end supply chain expenditure.
The Supply Chain Cost Reduction Challenge: When the leadership at Sunsweet looked into the company's production cost issues, recognition soon dawned that the distribution network was at least partly behind the problems. As a result, the company looked at how it could redesign the network to take out some of the production costs.
Later, it became apparent that although a redesign would yield some benets, one of the most signicant issues was in the approach to demand forecasting. Sunsweet was using a manual forecasting approach, with spreadsheets being the only technology involved.
The ineciencies of this approach proved not only to hamper eective forecasting and production planning, but the knock-eect was an excess of warehouses in the network-so forecasting proved to be both a driver of production cost, and a key to improving the distribution network.
The Path to Cost Reduction: As in a number of the studies we've explored here, technology played a large part in solving Sunsweet's problems. After evaluating some 30 dierent software solutions, the company nally settled on a supply chain planning suite, and planned its improvement program to make use of each of the solution's modules in sequence, allowing ROI to be realized in phases as each module was implemented and leveraged.At the same time, Sunsweet implemented a sales and operations planning program (S&OP) that once established, enabled plant resource requirements to be anticipated months-rather than weeks-in advance. As the overall improvement plan passed through its ve phases, positive results accumulated and as hoped, software ROI reached 100% even before the company completed its full implementation.
Supply Chain Cost Management Results: Of course, the objective of Sunsweet's improvement program was not merely to achieve a 100% return on investment in its supply chain planning platform. The aim was to reduce production costs, and although the company hasn't published hard gures to quantify the total nancial gain, it has claimed the following wins:
A 15 to 20% increase in forecasting accuracy
A reduction in overtime from 25% to 8% in production facilities
A 30% reduction in nished-goods spoilage
Number of warehouses in the United States cut from 28 to just eight
A transportation cost-per-unit that remained static for two years despite increased utilization of costly refrigerated transport and rising fuel costs
1. What is the main problem or issue in the case study?
2. How does it relate to Purchasing, Procurement or Strategic Sourcing?
3. How does it impact the rest of supply chain/logistics activities?
4. What are your recommendations on solving the problem? Mention a minimum of three recommendations. Think outside of the box and critically.
5. Select one of your recommendations and provide a detailed implementation plan.
6. What are some of the risks in your implementation plan and how would you mitigate them.