CHG Materials Planning Team Saves Millions Without Cutting Coupons
You know the feeling… you’re hungry and when you check the fridge or pantry there’s little there. Like it or not, it’s time to reload your stock. Whether it’s whole fruit or Froot Loops, a trip to the grocery store is in order.
The same holds true for CHG. We do food. When you’re in this business, the pantry can’t be empty. Your stock can’t go low. If it does, someone may go hungry – production lines won’t run and customers won’t be served.
Someone at CHG has to do the “shopping.” Our Materials Planning Teams – in Texas, Kansas and Missouri as well as eastern Canada – make sure plants have the raw materials and packaging they need to make and move goods through production to our customers and, ultimately, to your refrigerator or pantry.
Kent Katsuda, Martha Camareno, Teresa Browning and Tinamarie Kern recognize and celebrate 51 days without a customer shortage in materials or packaging inventory. The team updates the number and rings a bell with each celebration of the streak.
The Materials Side
Teresa Browning leads one of the two US corporate materials planning teams. Her team does the shopping for six plants – Denton, Langdon, Duncanville, Prosperity, Carlstadt and San Antonio. While you can make a quick trip to the store for tuna, Twinkies or toilet paper, Teresa and her team have to use software and spreadsheets to ensure the timely delivery of thousands of items to their plants.
Plant inventory lists are long, from basics such as flour, salt and sugar to more unique ingredients like dehydrated tomato, conventional quinoa and potassium bromate.
“Some facilities have more than 300 different raw materials plus another 500 different packaging items,” says Browning. “One facility may have over 900 different items to keep track of.”
The team begins each day checking each plant’s inventory. Then they connect with schedulers at each plant to discuss any needs or challenges. If a material is running low, there’s little time to hesitate. The team must find that material as soon as possible or production lines may not run as planned.
“If we are running low, we’re in crisis mode,” Browning says. “How can we get more materials in? We reach out to suppliers immediately or see if another plant in our network can transfer it.”
This year, the team is focused on reducing customer shortages as a key performance metric. It’s not uncommon for product shortages to occur with a customer, whether it’s a grocery or restaurant chain or a food service distributor. Shortages may occur because of problems outside the scope of the Materials team – an order change, a damaged product, a forecasting error or a transportation issue. As long as “Out of Stock Raw Material” doesn’t show up on the daily report, the Materials team can celebrate. The team recently celebrated 51 consecutive business days without a shortage!
The Planning Side
Materials planning can be more of a quandary. As a planner, you strive to make sure your plants have enough stock but not too much. You also must consider when that material will arrive, how much space is available to store it, and when it’s scheduled to run. All four have to align. No problem for Browning, who loves puzzles and has a knack for analyzing and solving problems.
“You really have to pay attention to a lot of things. You can’t just order a ton of materials so that you don’t have to worry about it for a few months,” she says. “At some plants, there may not be enough storage space. Or that material may not have a long shelf life.”
For example, Carlstadt (Tribeca Oven) recently began producing cheddar and onion bagels for a global coffee chain. Production requires not one but two refrigerated items. When fresh, cheese and onions expire in a matter of days and the plant has limited refrigeration space. The team has to determine how many shipments the plant can hold and if the materials will enter production before they expire.
“Working that out can get kind of complicated,” says Browning. “You can’t bring it all in at once, so you have to plan it out strategically and work with the plant to ensure everything is set for production.”
Dollars and Sense
How many times do you go to the store and come back with more than you planned, especially at a warehouse club? Do you really need 45 rolls of toilet paper or a box of four dozen Pop Tarts? How long will it take to use those items and where are you going to put them?
The same goes for CHG. In the past, a plant may have ordered 10,000 pounds of a material to avoid having to order again for six months. Sometimes that item would expire or collect dust on the warehouse floor and go unused. So the US materials planning teams had to take a fresh look at their plants’ shopping habits.
“When I started here, we weren’t always ordering quantities that made sense. The system had not been optimized,” says Browning. “We evaluated every single material. Are we ordering a quantity that makes sense? Are we holding a safety stock that makes sense? We now review these assumptions quarterly to ensure changes in our business are met with changes in our purchasing behavior.”
In FY23, CHG had more than $36 million in raw material and packaging inventory sitting and waiting to be used in US plants. Months of critical review and implementation of new standard work processes generated radically improved outcomes, reducing inventory holding costs by nearly $8 million a year later.
“That is money that was previously tied up that is not on our books anymore,” says Browning, “It’s money that can be spent elsewhere.
“We simply identified areas of opportunity. It helps the plants because they are not overflowing with inventory. If we can be $8 million lighter, that’s a significant impact on space as well.”
That’s smart shopping.
– Scott Wudel, CHG Communications
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