Software adopted by Ferrero to manage stock, maximise transparency and slash wastage gains a welcome reception as it gains big returns on investment
Facing a two-pronged gloom of recession plus pandemic, economic uncertainty has encouraged consumers to spoil themselves with small, affordable indulgences in place of big-ticket purchases like travel and breaks. Offering comfort in the form of confectionery that includes Nutella, Thorntons Continental and Kinder Surprise – as well as its trademark praline balls – Ferrero experienced almost unmanageably high levels of sales last year.
Even before the Covid crisis, the food manufacturer was grappling with issues around supply chain efficiency and striving towards reductions in food waste. At times access to information wasn’t quick enough to constitute inventory visibility, and add to this working with multiple partners, each with their own information streams, and it became increasingly challenging for the business to make the right decisions.
However, having determined that improved organisation of data and information would be key to improving processes – and in the hopes of streamlining stock and reducing food waste – Ferrero rolled out a new system in 2019, in partnership with software company Alloy.
Alloy works with FMCG companies using a data platform to map the journey from manufacturer to end-consumer, monitoring businesses’ day-to-day operations, and analysing shifts in consumer demand. The software system analyses the speed at which products are purchased and redistributes inventory from one location to another, to avoid unnecessary production and prevent products running over their ‘best before’ date while sitting on the shelf.
The data derived from the platform has allowed Ferrero to monitor its inventory at a granular level, moving stock away from low-sale stores and increasing quantities in prime locations to help maximise sales and reduce waste. This has been particularly helpful for products that are manufactured internationally. Crucially, the system delivers information fast enough to create a degree of stock visibility that means they can make informed decisions. This latter has proven especially useful when launching products in retail locations where the company’s brands were less established, allowing them to adjust to demand more quickly.
Glenn Lawse, vice-president of supply chain, Ferrero North America, says: “This partnership has allowed us to quickly add value and help us expand our capabilities. Using the information Alloy provides, we’re able to better gauge potential demand by seeing exactly what is happening on shelves at a store level.”
Using data to streamline its supply chain and reduce food waste has enabled the manufacturer to improve the efficiency of its operations by cutting down on overstock and out-of-stock items. Meticulous inventory monitoring has boosted the business and its brands. Lawse says: “Supply chain data helps us check our assumptions and prevent situations in which we have our products sitting in transport in warehouses at the wrong time or the wrong place.”
The software, explains Lawse, helps to provide deep supply chain visibility to the extent that you can see past top-line information – for example the fact that many retailers may be ordering – and instead enables the manufacturer to gauge which retailers may be sitting on supply, and which may have zero, or where there are in-stock issues at the retail level.
Additionally, one of the business benefits of rolling out the software platform has been achieving the desired reduction in food and packaging waste. As part of a wider trend among manufacturers aiming to create more unified and reactive supply chains, cutting food waste is a positive result of the general drive towards streamlining processes.
In a world where one third of food produced – or about 1.3bn tonnes – is thrown away globally each year, according to the United Nations (UN), these losses can cost companies dearly. Indeed, the total financial cost of wasted food in the US alone is estimated to be about $218bn, according to ReFed, a non-profit focused on reducing food waste.
And this has wider implications: the UN estimates that food waste is responsible for about 3.3bn tonnes of greenhouse gases pumped into the atmosphere every year. Therefore, as Lawse explains, in addition to making the client’s business more efficient, “the data helps us meet Ferrero Group’s commitments to reducing potential environment-impacting waste.”
This is even more pertinent when it comes to seasonal products, those packaged around Valentine’s Day or Christmas, for example, which can lead to increased losses because there’s a defined timeframe for sales, compared to a product with standard packaging. “It’s very important for us to move through those kinds of things very fast because we want the customer to have the best experience with it,” Lawse says.
Nothing but upside
The project has delivered a clear return on investment, explains Lawse. “We’ve had a great experience so far, and are now increasing the number of customers we are pulling data from.” As Ferrero broadens its use of the Alloy platform, Lawse expects not only to meet but to exceed the bottom-line impact of 5% which was estimated from the initial pilot project.
In a nutshell
- Ferrero is the biggest consumer of hazelnuts, using 25% of the world’s supply
- The majority of its hazelnuts are sourced from Turkey
- The company’s milk is 100% traceable, obtained from local sources
- More than 590,000kg of Nutella are produced per day
- Fans celebrate World Nutella Day on 5 February