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Heineken Demand Planning

SCM Project Presentation

Assel Gubaidullina

on 11 March 2013

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Transcript of Heineken Demand Planning

The Heineken Demand
Planning Beer!
Beer! Beer!
Beer! Beer! Beer! Now that we have your attention... with Maryam Zarreh
Assel Gubaidullina
Samaira Kalita
Reem Loutfy
Mohamed Latif Introduction Heineken Company found in 1864 by Gerard Adriaan Heineken

Nowadays, Company has more than 250 international, regional, local and specialty beers

In 2006 the increase of exporting beer was over 18% compared to 2005

In 2010, HEINEKEN acquired the beer operations of Fomento Económico Mexicano

In 2011, HEINEKEN continued to create new platforms for future growth by acquiring seven new breweries in Africa

In January 2013, it acquired remaining 18.4% interest in Asia Pacific Breweries Ltd

Current CEO is Jorge Fernandez Garcia Heineken main strategies The main goal is to defend and strengthen a leading global market position and preserve independence. To strategy to obtain this goal is:

Achieve levels of sales and profitability

Maintain a strong portfolio of beer brands

Maintain strong local market positions, a good sales mix and an efficient cost structure

Fulfill its corporate social responsibility Heineken main competitors InBev Merge of Interbrew (Belgium) & AmBev (Brazil) 190 mln hl
Anheuser Busch USA 160 mln hl
SAB-Miller UK-South- Africa-USA 125 mln hl
Carlsberg Denmark 90 mln hl Heineken Products and brands Beer Type Brand name
Stout Murphy ́s Irish Stout
White beer Paulaner
Alcoholfree Buckler
Mixdrink Desperados
Strong beers Affligem Porter’s 5 forces competition of Heineken SWOT Analysis of Heineken Strengths
-Brands in over 13 markets
Very Differentiated
-Global brand /pioneer of international strategy
Has made many acquisitions with national breweries Bottle
-Recognition and different dispensing instruments Strong distribution channel
Green Bottle
Mini Keg Weakness
- Conservative/”Play it safe” culture
Struggle to obtain large breweries
- Not drank by younger beer drinkers
Although consumption age has dropped from 40 to 30
- Price when compared to U.S. domestic beers
$10 per six pack—Heineken
$7 per six pack -- Domestic Threats
-Increase in Drunk-Driving law
-Competitors increasing market share
U.S. industry
-Mergers and acquisitions of other brewers
Other brewers are becoming much bigger than Heineken
-In danger of becoming reliable but unexciting brand Opportunity
-Low calorie beer
Society is pushing for the healthy beer
Population is increasing drastically
Have greater market share
-Hispanic consumers are growing rapidly
U.S. industry Heineken Value Chain Analysis Heineken Supply Chain A global network of distributors and 125 breweries in more than 70 countries The logistic objectives:
Doing the right things (being effective)
Doing the right things the first time right (being efficient) Heineken Supply Chain Set-up and Organization 3 planning departments are responsible for decisions on a strategic, tactical and operational level Problems One of the biggest challenges that Heineken face today is to provide efficiency under adverse conditions:
products from anywhere in the world are demanded
the stocks are increasingly diversified
the products cycles are becoming shorter
consumers’ hunger for innovation
the huge competition forces producers to continuous promotional activities

Heineken is facing with problems to capture and retain a consumer!

The main problems with the current process were rooted in its extreme inefficiency:
Long lead times
Damaging image Requirements Mohamed Latif, Senior Director of Supply Chain Management I want a forecasting tool that able to manage the demand planning and inventory optimization processes Software solution should follow these requirements:
1.Help Heineken to reduce lead time
2.It should cover following features:
a.Demand Planning
b.Inventory Optimization
c.Supply Planning
d.Promotion Forecasting
e.Production Planning
3.Able to integrate with current ERP (SAP R/3)
4.User-friendly interface
5.Fast implementation and training users
6.Affordable price Samaira Kalita, Chief Information Officer No problem, I will find one Current system The operations group was comprised of 12 staff members and professionals. They were responsible for order processing and managing transportation and distribution.
The process:
1. Distributors would frequently sit down with their district managers to plan orders three months in advance. Manually filling out order forms on order quantity

2. Order form was then mailed or faxed to Heineken's headquarters in Netherlands

3. Data entry staff at the headquarters would enter the information manually into their system and check to make sure the order correlated with past orders

4. Once approved and a purchase order assigned, order would be transmitted to brewery.

5. Heineken NV took over control of the process by :
Scheduling the production of the beer
Bottling and packaging it
Loading it into a container
Shipping it across the Atlantic to be delivered to the distributor Process took 12 weeks! Heineken conducted a survey amongst their distributors.
Results indicated that the distributors were not receiving the kind of service they required or expected because of long lead time required for orders placed. EVALUATION PROCESS

Mode of comparative analysis
Features of demand planning
Results OBJECTIVE OF EVALUATION PROCESS Conduct a comparative analysis of different computer applications

Determine to reach the customers with the demanded product in exact amount and at the right time COMPARATIVE ANALYSIS Third-party web-based decision support system “Technology Evaluation Center” (TEC) . Three software tools for demand forecasting have been identified as possible solutions:
Slimstock (Slim4)
ToolsGroup (ToolsGroup) Requirements for Demand Forecasting RESULTS OF THE COMPARATIVE ANALYSIS Easy integration with ERP SAP (R/3).

Avoid any additional cost and time.

Reduce inventory level

Real-time forecasting

Collaborative forecasting SAP APO 7.0 SAP APO
SAP Advanced & Planned Optimizer Provides the complete tool set needed to plan and optimize supply chain processes at the strategic, tactical and operational planning levels. To create a forecast of market demand for Heineken’s products. Enables us to integrate people from different departments, and even different companies, into the forecasting process

Characteristics-Based Forecasting
In APO Demand Planning, We can create a forecast based on the characteristics of configurable end products:
 Color of bottle
Shape of bottle/can
Beer (end product)

Characteristics-Based Forecasting allows the company to forecast many different variants of the same product and react swiftly to changes in market demand.
Heineken can also place orders with its suppliers for assemblies and components in a timely fashion. Network Design Supply Chain Collaboration Supply Chain monitoring Shipment and Transportation Scheduling Demand Planning Help enterprises carry out collaborative supply chain planning activities with their business partners.
Thus, relevant input from business partners can be taken into account to synchronize planning across the network and leverage APO to generate optimized plans based on data from the supply network.

High volumes of data can be transferred at low cost and even minor business partners can exchange information in an economical manner. Interactive on-line access to each other’s systems can be achieved easily via a conventional Internet browser.

SAP APO Collaborative Planning was designed to:
Enable exchange of required planning information with business partners

Allow the use of browser to read and change data

Restrict user access to authorized data and activities SAP APO system effectively replaces local shipping and transportation scheduling functions if materials that are to have an availability check run in the SAP APO system are involved.

Shipment Scheduling
All processes that are necessary to initiate goods shipment are included in shipment scheduling. These processes include loading, picking and packing. Shipment scheduling determines the material availability date and loading start

Transportation/Vehicle Scheduling
controls deadlines affecting shipment preparation/execution
Transportation lead time
Transportation time
Unloading/reloading time (for stock transfers).

If the system uses forward scheduling, the possible delivery date is determined. Alert Monitor

The Alert Monitor is a standalone component of APO that enables the company to have a unified approach to handling problem situations.
It give notification a problem occurs during:

Production plans
Demand plans
Vehicle schedules This is planning application for making tactical and strategic supply chain decisions. Strategic logistics planners and supply chain managers can model and redesign the supply chain by performing: Include what-if analysis for finding the best network solution and for evaluating the benefits of any changes

The option to perform simulations with different demand and supply patterns or with different cost or capacity constraints Supply Network Planning APO Supply Network Planning integrates:


Supply Network Planning uses advanced optimization techniques, based on constraints and penalties, to plan product flow along the supply chain.

The result is :
optimal purchasing
distribution decisions
reduced order fulfillment times and inventory levels
improved customer service To generate comprehensive Tactical planning and sourcing decisions on basis of global consistent model BENEFITS SAP APO system will allow the Heineken Company to improve communication with distributors reducing inventory levels.

SAP AO will allow distributors to check and track orders. Since some distributors receive up to fifty containers of beer per week, it is important for them to be able to know what products each container holds.

SAP APO system will allow the Heineken Company to improve communication with distributors reducing inventory levels How? Distributors log on to the customized web page using a standard browser and ISP connection.
After entering their login ID and password, distributors view the Heineken sales forecasts for their region, and modify and submit their forecasts.

The system provides them with:
Statistics from last year
Distribution and sales from the same period last year
Provides them with what Heineken forecasts they will need for the current period. Lead times on order delivery will decrease from 10 to 12 weeks to an average of 4 to 6 weeks.

Inventory will be reduced from 45 to 30 days and sales will significantly increase annually

SAP APO will eliminate 3 data entry positions

SAP APO guarantees minimum of 8% increase in total revenues next year Quantitative Benefits Qualitative Benefits Staff will spend less time on ordering issue and more time working with distributors to sell beer

Relations with distributors significantly improve

Increase of the sales force without actually hiring additional people

Human error in order taking will be eliminated and orders will be received electronically instead of via telephone/fax Cost Benefit Analysis Conclusion Heineken needed to be more responsive to market demand fluctuation. Because of the long lead-time between order and delivery, they found that responding to marketplace changes in a timely fashion was becoming increasingly difficult.

Heineken’s current process was very labour intensive and involved almost no central planning. Orders would arrive at all different times, which made it difficult to coordinate brewery production, raw materials purchase, shipment and delivery. SAP APO Collaborative Planning was designed to:

Enable exchange of required planning information with business partners

Allow the use of browser to read and change data

Restrict user access to authorized data and activities

Support consensus planning process Conclusion Conclusion The implementation of this new system will enable Heineken to a set of quantitative and qualitative:
Objected reduction of 50% in the lead-time from order to delivery
Guaranteed minimum of 8% increase in sales

The SAP APO system will help the company achieve several goals:
Most importantly is to improve customer satisfaction
Increase Heineken’s sales and revenues.
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