Managing Supply in Response to Erratic Consumer Behavior During a...

                                                                                                                                                                                                               

CASE STUDY FOCUS: ADVANCED PLANNING, MARKETING ANALYTICS

Managing Supply in Response to Erratic Consumer Behavior During a Limited Time Offer

Accurate forecasting and supply chain management help a quick service restaurant (QSR) chain reduce inventory by 97 percent and save $2 million year-over-year during a limited-time promotion.

Challenge

A QSR chain with over 10,000 retail locations brought back a popular menu item for a national promotion. Extraordinary, unprecedented demand resulted in sales 50 percent above expectations during the first week of the promotional period.

Fearing they would not be able to keep up with consumer demand, many retail locations reacted by stockpiling product while distribution centers ordered quantities that were not in line with projections. This led to an imbalance in the system and some locations having too much product while others did not have enough. Suppliers worked to meet demand, but sales for the item dropped significantly after the first week and remained below expectations for the duration of the promotion. As a result of the excess production and volatile sales, the QSR chain wound up with significant waste - nearly three million pounds of product - at the end of the limited-time offering.

Despite the losses, the promotion boosted end-of-year sales and was deemed a success. The QSR chain elected to implement the promotion again the following year, but wanted to be better prepared to react to erratic consumer demand.

Solution

The chain sought help from partner HAVI. HAVI increased the accuracy of the forecast and developed a more collaborative, transparent inventory management system for the chain that would ensure supply while minimizing waste and inventory obsolescence. Understanding the unique trend line for demand that appeared during the previous year’s promotion, the business analytics team at HAVI built a forecast that peaked in the first week of the subsequent year’s promotional period. HAVI continually adjusted the forecast based on actual sales throughout the promotion.

Communication between HAVI, retail locations, distribution centers and suppliers were essential – not only for the purposes of sharing information and adjusting forecasts but also in assuring sufficient supply across the chain locations for the duration of

the promotional period and, in some instances, beyond. During the second year promotion, the QSR chain offered each retail location the option to continue selling the product past the national promotion end-date through year-end, requiring suppliers to be even more flexible and collaborative. HAVI made this possible by developing one view of demand for the entire supply chain, from suppliers to distribution centers to restaurants.

HAVI took control of ordering out of the hands of retailers and looked to the distribution centers to coordinate requests with suppliers and manage distribution of product across the system to balance supply needs. Leveraging the supply chain management services of HAVI, suppliers gained visibility into restaurant level activity as well as total network inventory, enabling them to more efficiently manage production and meet demand.

HAVI helped the QSR chain save $2 million and reduce waste by 97 percent over the previous year. Indeed, HAVI’s service was so important to the success of the second-year promotion that the QSR chain requested the offer to be extended to future promotions.

Benefits

Increased visibility and collaboration – The QSR chain was able to maintain sufficient supply across 10,000+ retail locations by HAVI developing one view of demand for the entire supply chain from suppliers to distribution centers to restaurants.

  • Reduced obsolescence – HAVI helped the chain reduce excess inventory at the end of the promotion by 97 percent over the previous year.
  • Better demand planning – HAVI monitored sales and inventory in real-time and adjusted forecasts to mirror the most recent sales which led to a $2 million cost savings across the system when compared to the previous year’s promotion.