Using Forecasting to Counter Volatility

Soft drink bottler uses supply chain software to reduce finished goods inventory in the face of sales swings

Tempe, AZ  April 10, 2002  Promotions and price changes are a painful fact of life in the soft drink industry, as are the resultant variations in weekly sales volumes. But one Coca-Cola bottler has implemented a software solution that has helped to tame this beast.

Based in Charlotte N.C., Coca-Cola Bottling Co. Consolidated (CCBCC) is the second largest Coca-Cola bottler in the United States and one of the highest per capita soft drink bottlers in the world, with $1 billion in annual sales. The company's 6,000 employees run five production centers and 70 sales and distribution centers.

Operating in its highly promotional and price-driven sector, the company routinely experiences as much as a 200-250 percent swing in sales volume week-to-week for any particular product (swings over 1,000 percent are not unheard of in the industry).

Last year, after implementing Manugistics' NetWORKS supply chain software, the company began taking advantage of the solution's forecasting capabilities in an effort to manage this volatility and simultaneously reduce inventory, while maintaining customer service levels. As part of the effort, the bottler worked with Solutions Consulting, a subsidiary of Perot Systems, to centralize core activities and establish new business practices within CCBCC's forecasting, production planning and distribution planning departments.

By centralizing and streamlining forecasting across its enterprise utilizing Manugistics' Web-based collaborative forecasting solution, CCBCC is now better able to model promotional lift to ensure the right amount of inventory is available to meet promotion-influenced demand. By optimizing corporate-level forecasts that are shared weekly with field sales and trade marketing teams, the company can create consensus forecasts that extend to the stock-keeping-unit (SKU) level.

As a result, CCBCC has reported a 15 percent reduction in finished goods inventory in the last six months, on top of the approximately 40 percent reduction in finished goods inventory levels achieved following the initial implementation of the Manugistics supply chain solution.

"The Manugistics solution quickly helped us achieve significant inventory reductions," said Dave Hopkins, vice president of logistics at CCBCC. "Perhaps even more impressive, the solution has enabled us to cut a full day off our cycle time over the last six months alone, even as we introduced nearly 94 new SKUs, and all without any sacrifice to our customer service."

This success has prompted CCBCC to explore the deployment of Manugistics logistics management solutions and other solutions targeted at the bottler's key business processes.