Flour Power

From top-down to bottom-up, Grand Mills for Flour & Feed Company is harvesting the benefits of a new supply chain

Syed Wajihuddin, Supply Chain & Logistics Manager and Senior Sales Manager, Grand Mills for Flour & Feed Co

If flour and water are two of man’s most basic needs, imagine the demand for these products in the booming UAE market. Perhaps this is the reason for Emirates Foodstuff and Mineral Water Company’s (Agthia’s) financial high. In the quarter ending March 31, 2008, for example, the Abu Dhabi-based entity which includes Al Ain Mineral Water and Grand Mills for Flour & Feed, reported an increase in net revenue of 41 per cent and growth in profits of 104 per cent compared to the same quarter of the previous year.

Or perhaps these staggering numbers come in part from Agthia’s new supply chain. In the past year and a half, new management has entirely changed the company’s structure, says Syed Wajihuddin, Supply Chain & Logistics Manager and Senior Sales Manager, Grand Mills for Flour & Feed Co, over pizza in his office at the factory in Port Zayed.

“When we joined this organisation, it was not a supply chain organisation, so we built it from the basics,” he recalls. “There was no planning function. The organisation was running on order-based production.”

Wajihuddin, who has worked for both Gilette and Unilever, says his team started from the top down.

“We put in place a supply chain unit and demand planning function. Then we started building on the sales business intelligence, based on averages, seasonalities and trends. This top-down forecasting system gives you visibility as a business unit in terms of a sales forecast across a rolling period.”

But once this orthodox system was up and running, it was time to change again.

“In quarter one of this year, we moved to bottom-up supply chain forecasting, which was always my dream,” says Wajihuddin.

“You start managing your budgets with a real-time forecast coming from each individual salesperson,” he explains. “Each month, a sales man will sit down on a tailor-made system outsourced to an ERP company and he will input a forecast for each SKU and for each customer, predicting what he will sell in the current month and for the next three months.”

Each salesman’s forecast is then tallied to create a total sales forecast.

“A bottom-up forecast challenges the business intelligence of an organisation, because it comes directly from its roots,” proclaims Wajihuddin.

The demand planner then consolidates these numbers, sanitises them, reviews any variances and passes the forecast on to the sales manager. The sales manager reconciles the data and agrees upon a final number with the supply chain manager.

“Sales people tend to get excited, so you tone the numbers down,” explains Wajihuddin. “If a sales guy is not enthusiastic, he does not belong in sales. If a supply chain guy is not logical, if he is not thorough, he does not belong in the supply chain.”

This unconstrained demand plan then goes to the production planner who determines the feasibility of the forecast and formulates a rough cut capacity plan (RCCP). “RCCP tells you if you need to make a long-term investment decision, or if you need to manage within given operations by pre-poning and post-poning production,” says Wajihuddin.

The RCCP helped his team decide to outsource certain stages of production. “We needed support with packing for the feed business,” he admits.

Wajihuddin insists bottom-up forecasting is highly accurate and detailed. “When you get to the level of forecasting each SKU by each customer, it’s amazing,” he exclaims. “Immediately you start having more analytical power within your organisation. Which segment is growing the most? Which sales guy is bringing in the most business? With which customers are we losing sales? With which customers are we increasing sales? Which are the exact SKUs we need to rationalise or discontinue? Where are the sales guys failing to focus? This comes from the ground.”

The finance team then reviews the demand and supply plans and converts them into financials, focusing on costs, profits and inventory, asking, ‘Do we see a gap?’” says Wajihuddin. “Fortunately, we as a company are doing so well that we need to fill a gap on the production side,” he adds.

Lloydstar provides Grand Mills with a dedicated fleet

Sales and operations then agree on one number – a financial goal for the entire company. Sales, supply chain, finance, logistics, customer service are all aiming to reach this one target. “With any function, the language becomes the same,” says Wajihuddin. “We have developed a culture where people talk one single business plan.”

He says this bottom-up forecast clarifies ownership amongst company departments and tells them exactly what they have to do: “We know that we need to deliver that one single number.”

This new supply chain has brought the company a reality check, according to Wajihuddin. “You bring people so close to the reality of the business that all the flashy slides and power point presentations mean nothing,” he says. “What makes the difference for us at Agthia is numbers. Reality. We don’t like butterflies. We like things on the ground.”

Stocking up Wajihuddin says accurate forecasting helps the organisation know exactly how much inventory it needs to keep, and how many pallets to spare. “Warehousing functions are then aligned with the requirements. Each unit knows how much it will stock.”

This comes in handy in a touchy grain market. “Grain buying is very strategic, so at times it is not linked with your planned demand. In some situations you buy for the next nine months. Other times, you buy for only one month,” he says, explaining that grain has an extended shelf life.

“You can then take the money you saved and put it into sales and marketing, rather than focusing on inventories.”

On the ground When faced with a scarcity of transport providers in the UAE, Grand Mills came up with its own solution – partner with a transport provider who will supply a dedicated fleet in exchange for guaranteed business.

Grand Mills processes its grain on site

Wajihuddin’s team convinced Lloydstar to set up an office on the Grand Mills premises. “We told them, ‘Listen, why don’t you outsource your fleet to us? This is our full year requirement, this is our monthly spread, this is our daily spread and this is our SKU spread. This is the proper number you need to deliver, with variations of 10 per cent.’”

He says the two companies no longer work on an invoice-by-invoice basis. “That can be very tedious,” he explains. “Imagine you make up to 5,000 shipments per month. Each invoice has to be checked, signed and paid – so much complexity.”

Instead, Lloydstar hands Wajihuddin one invoice per day to keep track of shipments.

He says having a transportation company on site makes life at Grand Mills much easier. “The beauty is that customer services, warehousing and logistics are sitting on the same lot. I don’t need to fax, I don’t need to call.”

And the well-established relationship with Lloydstar benefits Grand Mills’ relationship with its customers. “Logistics is the physical contact between you and your customer,” says Wajihuddin. “If you fail in logistics, you have actually failed physically.”