Vintage advice

Vintage advice

Lessons from Allied Domecq New Zealand, formerly Montana Wines, on harnessing critical production planning and forecasting tools for a fragile resource and a shifting market.

Prior to 1999, then Montana Wines had a range of disparate applications with finance, distribution and sales reporting on separate systems. It knew it needed a more efficient information flow to prepare for growth. It chose enterprise management system provider Intentia and its Movex ERP suite to expand its forecasting, production and resource allocation capabilities. This was implemented across its New Zealand and Australian operations.

To maximise use of the new ERP system, the company had to re-align its business processes from being 'task driven to process driven', resulting in more flexible inventory management, improved service and reduced administration costs.

The deployment of Movex also proved timely as Montana acquired the country's second largest and oldest wine company Corbans. Having Movex on board meant it could easily integrate with the established winemaker and quickly take advantage of the economies of scale, particularly for the export market. Within nine months, Montana itself was acquired and became part of the Allied Domecq global organisation.

AD Wines NZ has significantly improved its production planning and forecasting by adding new modules to its Movex enterprise resource planning (ERP) systems and Manugistics forecasting tools.

Peter Belcher who has been with the company for two years as supply chain project manager works closely with management, staff and suppliers to improve systems for more accurate planning.

The additional wine brands and the new ownership presented a complex management challenge to ensure schedules were met based on a realistic forecasting and production planning. Until recently, planning was a tedious, time consuming and largely manual task involving several Excel spreadsheets and Movex. A lot of human effort was required to cross check the systems to confirm they contained the same information, says Belcher.

He works closely with production planner Phil Taylor, who is tasked to ensure the company meets 12 monthly forecasts based on accurate knowledge and confidence the wineries have enough wine for the next 12 months.

Taylor's forecasts cover capacity allocations and production schedules across more than 360 products including sparkling and fortified wines and still wines in traditional styles such as Bordeaux, Sauternes, Chardonnay, Cabernet Sauvignon, Merlot, Pinot Noir and Sauvignon Blanc.

"There was always a risk of old data or human error. Plans had to be changed far too often," says Taylor.

"Our business is very complex in terms of the number and the difference within products. Commodity wines in the middle to lower value have a high turnaround. More expensive investment wines are only bottled perhaps once a year and there is a range of product that sells into many markets. Each has different methods of planning," he says.

Early in 2003, the company upgraded to Movex version 12, which further improved the company's ability to calculate requirement dates for the various products. It went live in April 2004 with Intentia's multi-site planner (MSP) module which determines how best to meet those requirement dates and if in fact they can be met before the material requirements planning (MRP) module places orders for labels, bottles and other inventory.

These were critical steps in greater supply chain integration enabling further improvements in production planning and distribution.

While AD Wines NZ knows well in advance whether its wine will meet the forecast demand, MSP handles short-term capacity planning. It takes into account ongoing changes, for example, if there has been a run on a particular wine type because barbeque season came earlier or a promotion was more successful than expected.

New export orders might also put pressure on production. "In MSP, it's all about managing the present by balancing between the wine at the wineries, production facilities and demand," says Belcher.

"Now we have a very visual look at the various options so we can see how each new allocation impacts on the production lines and make the decisions that are most efficient and have least impact on existing production runs. Sometimes it's making the best out of the worst position," says Belcher.

"It may mean we have to quickly change our production schedule to replenish a particular product without impacting time allocated to other products which are due for replenishment in the normal way.

Intuitive system

MSP is now critical to Taylor as he weighs existing stock availability against reports from salespeople about expected demand for the next couple of months.

The demand data is updated to meet shifting market consumption, export orders and production requirements with MSP sometimes having to react daily or weekly. Consequently inventory data is changing in Movex to ensure there are enough wine, bottles, labels and cases available.

These changes have a direct impact on forecast data, which must also be revised. The New Zealand operation was confident it now had the right production planning tools through its relationship with Intentia but saw value in streamlining its forecasting with new tools from Manugistics Systems.

A Manugistics forecasting module went live in August this year after Allied Domecq colleagues from the UK helped with an eight-month implementation. The New Zealand operation now has a much more intuitive 12 month rolling overview of sales trends in order to gear up for future demand.

Once initial forecasts have been manipulated and confirmed in Manugistics, it is then downloaded into Movex to drive the material requirements planning (MRP) system for production planning. Reports are then generated and sent to winemakers and production, distribution and marketing management.

The Manugistics module is now being used across New Zealand and Australia and for obtaining forecasts from UK and US customers.

Allied Domecq has wineries in Gisborne, two locations in Hawkes Bay and one in Marlborough as well as a central winemaking team in Auckland. The wine is stored in the regions and bought to Auckland as required for blending or bottling based on reports generated through Movex.

The company treats its vineyards and wineries as if they were suppliers. "From a planning point of view, even though all our wine is internally sourced it is treated like a purchased item arriving two to three days before we bottle," says Taylor.

The MSP module and the Manugistics tools give Taylor one interface to all the information he needs, delivering much greater support for staff, capacity and inventory planning. "We kept the old systems going until we were confident everything was working satisfactorily and finally stopped using the old approach in August."

He says the new forecasting system has been a real boost to accurate decision-making. "I have a lot more information on my desktop than ever before. I'm having make a lot less changes to the plans."

Product efficiencies, good inventory and having stock available are not always in alignment but the new tools help him find the right balance. "I can run a different sequence, see the time required, the conformance and ability to deliver on time versus the total time to run," he says. "We run about 360 products which we bottle on site across five different production lines. We want to do this as efficiently as we can so we aren't bottling ahead of our need.

Creating efficiencies can be as simple as taking into account bottles, storage, age, labels and other factors and matching this with forecast demand and inventory requirements.

Running the same types of bottles, labels and case configurations together can make significant savings and running and red and white wines separately can reduce the set-up time and the amount of cleaning required.

Quality and quantity control

Supply chain project manager Peter Belcher says the new MSP system has proven ideal for capturing and retaining intellectual property. "Within Excel it was hard to quantify one option against another, so we were relying on Phil's knowledge and expertise as a planner. Now we quantify each option and identify the exceptions. A lot of that specialist knowledge for effective product sequencing is now put into the system."

With its new systems, AD Wines NZ can now take a multi-layered view of decisions, more effectively scheduling production and planning by taking into account forecast demand, export orders, stock requirements, line capacity and economic batch sizing.

It can respond more quickly and accurately to changing circumstances with a better understanding of customer needs. Improved forecasting has also led to a stability of supply, and greater flexibility to experiment and innovate."

"If we move a batch back or forward, our dry goods procurement people who handle the bottles, packaging, cases and labels have short lead times. We need to make sure we're not going to receive things we're not going to use or find we haven't ordered the labels if we move things ahead."

Based on effective forecast and planning system, AD Wines NZ is now much more confident it is making the right product at the right time, and communicating changes to the right people.

While supply chain efficiency is being constantly improved by the availability of more accurate data for planning, ordering and distribution, the company has been closely looking at other related areas where it can make improvements.

The next challenge in the supply chain is to take a long hard look at pro-curement. AD Wines NZ has been looking at its processes and total cost of ownership (TCO) when purchasing goods and services.

"We want to know if we're getting the maximum value when we spend a dollar with our suppliers rather than just the lowest price per item. If it is cheap but has a high failure rate or doesn't do the job, then we're not getting value and it adds to the cost," says Belcher.

"Whether it's buying bottles, hydraulic pumps or tractors you have to look at reliability and everything else. We need to ensure our suppliers are supporting us and continually improving the products and services they supply."

Part of that will impact production planning. "Rejecting products because of quality issues adds to the cost of ownership. We can't afford to set up the line, begin production and then halfway through discover we have a problem. We need to take a fresh look at the way we do things."

In the end, Belcher says to manage several projects you have to instil your passion for making things happen in your project teams and make sure you have their buy-in. "You need clear objectives that will provide significant benefits. If team leaders, supervisors and people involved in the detail believe in what you're trying to do, when you come up against obstacles, they won't say, 'I told you so'. They'd work for solutions."


How supply chain integration can eliminate tedious manual tasks.

Why accurate up-to-date data is critical when allocating finite raw materials.

What is the impact of flexible planning and forecasting tools make to production flow.

Rate your challenges

When interviewing business executives, MIS asks them to rate the most challenging elements of managing a project. Here, Peter Belcher, supply chain project manager, rates his challenges in upgrading the supply chain system of Allied Domecq Wines NZ.

Most challenging

Selecting vendors

Getting support of board and CEO

Getting support of other company stakeholders (including the users)

Strategy and planning

Keeping projects on time and on budget

Managing emergencies

Finding and motivating the right staff

Managing vendors

Least challenging

Allied Domecq Wines NZ had to show the new owners the planning system could deliver everything it promised rather than use software available in other operations in its global network. The local team convinced management the multi-site planner (MSP) module from Intentia was up to the task and this coupled with the forecasting tools from Manugustics have enabled a more flexible and accurate planning process.

Belcher says ultimately all anticipated benefits were delivered with no major obstacles. AD Wines NZ achieved automated sequencing and full integration of planning with the MRP process and automated reporting without any major frustration.

Belcher attributes this to the project involving a relatively small team and the skills of planner Phil Taylor and a consultant from Intentia. Pooling this knowledge and having everyone determined to achieve the desired outcome meant the project was easy to manage, he says.

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