U.K. Brewer Turns to Canada's Numetrix for Supply-Chain Help

Burton-on-Trent, England

Bass Brewers, one of the world's biggest brewing companies, was buffeted in the early '90s by a reshaping of its core markets in the United Kingdom. New competitors, changing consumer tastes and government legislation produced a potent mix that demanded a different business approach.

The brewer responded with a major overhaul of its supply chain that swept away many internal barriers and more closely connected production with demand. Supply-chain management software from Numetrix Inc., Toronto, provided the technology to support this change.

"We (previously) had a traditional supply chain with a number of stocking depots," said Howard Stone, the brewer's logistics supply manager. Because of inadequate coordination and communication between production and distribution, "the typical lead time for orders was a week."

"The old model was less responsive" and unable to meet the service levels "now expected and essential to our business," he said. Bass now replenishes depot stock in 24 hours based on orders received from its customers, a process known as "Replenishment to Demand" (RTD). About 3,000 pubs and retailers - approximately 13 percent of Bass's customer base - place orders using EDI (Electronic Data Interchange). Electronic links for invoices, price lists, delivery notes and proof-of-delivery also are being implemented with key accounts.

The RTD process generally has lowered stock levels in depots from five days to less than one day, Stone said. In addition, the throughput capability of depots has significantly increased, and stock reaching customers is much fresher.

	Using the Numetrix LINX system, Bass models the entire brewery network to optimize the flow of materials and resources across all segments of the enterprise.

Development of the new approach began at Bass about three years ago, with a major overhaul on the production side that included implementation of Numetrix software. As part of a broader business re-engineering program, the company already was reducing its brewing capacity and production costs. "That meant we needed to maximize the use of available capacity, and bring demand and capacity much more in line," Stone said. "To do that we had to plan as one big brewery."

Driving this re-engineering were fundamental changes in the market. Shifting customer preferences were adding volatility to an already diverse product mix. And while the British pub endures as a great social tradition, an increasing number of U.K. consumers were buying beverages from retail outlets, such as supermarkets, for home consumption.

"Home drinking is only about 25 percent of our domestic market, but it is growing," Stone said. Supplying supermarket chains and other outlets places more emphasis on small-pack products and promotion-led demand cycles, he pointed out. It also means shorter lead times and more volatile demand overall, as well as a greater need for automation to support retail programs like Vendor Managed Inventory.

The pub end of the drinks business also was evolving, due in large part to a 1989 government review that resulted in the so-called "Beer Orders." This mandate required brewers to sell half of the pubs they owned over a threshold of 2,000. The theory was that loosening the big brewers' grip on pub ownership would lead to increased competition and more choice for the consumer. For Bass, the legislation resulted in the forced sale of some 2,700 pubs.

A large portion of these brewery-owned outlets were scooped up and operated as chains by pub management organizations. These new entrants established supply contracts with producers - and former owners - such as Bass. Because they now could leverage the buying power of many pubs, the chains were able to apply pressure to margins, Stone explained. That reverberated up the supply chain, leading to efforts to reduce inventory levels and maximize asset use. "A lot more power moved to the retailer," said Stone, resulting in "a lot more awareness of the importance of the supply chain."

The penchant for home drinking was not the only consumer trend affecting Bass's operations. Pub clients were moving toward more national, premium-branded lagers, such as Carling and Grolsch, and away from traditional bitters that tend to be more regional.

"About a third of our output is now Carling, the U.K.'s best-selling beer," Stone said, referring to Bass's own national brand of lager. However, the brewer also must continue supplying its regional products; although in decline, they still represent a large market. For example, Stone said, a traditional Bass product called Tetleys Bitter is distributed nationally, but its real heartland is Yorkshire, particularly near the city of Sheffield. Bass' distribution network has to be flexible enough to handle the output of its national brands as well as the patchwork of demand created by these regional beers, Stone said.

This complexity is intensified by the fact that beers popular in particular regions often have to be produced regionally as well, because their distinctive flavor depends on such local factors as the water used. "It isn't just a matter of using the same rivets and screws to produce identical beers," Stone said.

Moreover, Stone noted that Bass offers a "full drinks service." It buys "factored brands" - wines and spirits, soft drinks and cider - from other producers and consolidates them with its own branded lines. This means that the brewer ships about 30 Bass-branded SKUs and 850 outside SKUs.

Bass brands are produced at eight breweries in the U.K., including the country's largest at its home city of Burton-on-Trent. Production time is two to three weeks. About 23,000 customers, split 75 percent/25 percent between pubs and retailers, place an order roughly once a week for an average of 8 SKUs.

Using the Numetrix LINX system, Bass models the entire brewery network to optimize the flow of materials and resources across all segments of the enterprise. The model is used to plan production schedules down to the SKU level and to plan the amount of packaging that must be ordered. Bass sources some 500 brewing and packaging materials from around 200 suppliers, with a lead time of up to 10 weeks.

An important element of this program is the synchronization of activities between production and packaging, made possible by use of Numetrix's Schedulex package and Supply Chain Integrator (SCI), an off-the-shelf solution that links different applications and databases.

LINX also generates a production plan for the complete network of Bass breweries. These plans typically are generated weekly for an 18-week horizon. Longer-term plans that look 18 months into the future are created for use in strategic planning.

This centralized planning resulted in marked improvements in brewery utilization, Stone said. Initially, capacity use rose to about 85 percent. After some systems modification, sustainable utilization levels of around 95 percent were achieved.

But improving capacity use was only half of the supply-chain equation. Bass next tackled integrating production with distribution.

Bass's view of distribution covers not only outbound delivery of its own and factored products, but also the flow of empty containers in the reverse supply chain. The company knew that improving the return of empties and integrating this flow into its planning programs had the potential to yield huge savings. Bass has more than $164m invested in some 2 million returnable casks and kegs and better use of this inventory would reduce the need to add new containers, as well as eliminate bottlenecks related to erratic returns.

Improving the availability of these units was problematic, however, because of seasonal fluctuations in demand - Christmas is a peak period, for instance - and the sheer complexity of the reverse chain.

Working with Numetrix, Bass was able to develop a way to manage these movements. First, demand for the empty containers is derived from the packaging plan generated by the scheduling system. Supply then is calculated by the system using a specially developed algorithm that predicts the rate of return of each size of empty container to the distribution center. Transport is optimized by taking into account these return-vehicle trips, as well as spot-market trucking opportunities.

Turnaround time for each empty container has been cut by one full day, a reduction that saves Bass an estimated $2.5m annually just in more efficient use of its 50-liter containers. In addition, further benefits will come from reducing repositioning and other costs associated with having containers in the wrong place.

Improving the flow of empties and the information about that flow impacts the whole supply chain, said Stone, since production is synchronized with the return of containers. "The rate of return of empties from customers is effectively our ability to manufacture, so that becomes our short-term manufacturing capability."

Having completed integration of outbound distribution and the reverse supply chain with production scheduling, Bass now is working to achieve the same integration for its factored products. For factored goods, a process more aligned to traditional Distribution Resource Planning (DRP) is being implemented, also using Numetrix. Combining statistics on historical sales with data on planned sales events, a forecast is created and converted into a replenishment order program with an 18-week horizon. Some factored products, such as wines, can have up to a 10-week lead time, said Stone. By combining this process with its own product replenishment program, Bass will be able to manage depot space utilization more effectively and make more informed decisions, he added.

More supply-chain refinements are in the pipeline. "As this project has evolved, we have identified opportunities to not only optimize distribution and production, but to optimize the whole supply chain," Stone said.

As Bass has removed many of the functional barriers that divided the different links in the supply chain, opportunities for greater synergy between these links have come to light, he explained. Now, work is under way to integrate production and distribution constraints into the planning and scheduling process, using Numetrix 3D, the company's latest product. This will ensure that a demand-driven plan can be supported by both the production and distribution departments.

The Numetrix 3D product is unique because it allows users to simultaneously address constraints in manufacturing, materials handling, storage and transportation, according to Brian Nickerson, vice president of technology at Numetrix. "3D is a multi-user system that gives people a common view of what's going on in the enterprise," he said.

Stone's ultimate goal is to manage only the exceptions. Bass is reaching a point, he said, where routine supply-chain processes operate smoothly. Now he wants to concentrate on the glitches - the unexpected events. Then, "we can use these systems to give us alerts, to identify problem areas and give us the supporting information to enable managers to make quality decisions," he said.

Stone envisions a sort of control board depicting the supply chain: Notice of a problem at one end is automatically relayed across the chain, so that all operators are alerted and react according to their own needs, but without disrupting the continuity of the supply chain. "If a bottle manufacturer says it has a problem with demand 18 weeks hence, we'd be alerted," said Stone, and the information disseminated so that each activity could be adjusted to take account of the glitch.

Numetrix and Bass also are incorporating internet capabilities into the system, said Nickerson, which will make information available to a wider range of people internally and allow connection to external supply-chain partners.

In a market that has been assailed by change, Bass has used its supply chain as a competitive weapon to help it maintain market position. In recognition of that accomplishment and its use of supply-chain technology, it was last year named Logistics Company of the Year by the U.K.'s Institute of Logistics, based in London.

Numetrix also has benefited from the partnership. "Bass is one of our key development partners," said Nickerson. "A lot of what is in our products today is a direct result of working with Bass."

Bass Makes Beer, Third Party Makes Deliveries

Outsourcing has become a common practice, but Bass Brewers has taken a novel route to offloading costly distribution functions. "When you own your distribution network and are an own-account hauler, you can ever only focus on reducing costs because you have nowhere else to go," said Howard Stone, Bass logistics supply manager. That changed in 1993, when Bass established a joint venture called Tradeteam with third-party provider, Exel Logistics. The brewer's fleet of trucks and some buildings were sold to the new venture, of which Bass is the minority stockholder. "The joint venture company can now seek profit generation rather than cost reduction," Stone said. Since the enterprise is not a subsidiary of Bass and the brewer does not hold a controlling interest, Stone said, Tradeteam is free to compete for business on the open market. Tradeteam is responsible for picking up product from Bass warehouses, assembling orders, and delivering to the end customer. "My team does the replenishment from the brewery into the depot based on orders we have received," explained Stone. Tradeteam uses Bass's order information to plan distribution services and build secondary loads. Wines and spirits, which can be picked at bottle level rather than at case level, are held centrally and transferred to the delivery depot overnight for consolidation with Bass products. Delivery is made within 48 hours of the order being received. "We aim for a single, one-stop delivery to every customer," said Stone. "The 48 hours is used to pull everything together from different places, so that we can get the order to the customer in a single stop."