Diageo PLC, the London-based maker of such premium alcoholic beverage brands as Smirnoff, Johnnie Walker and J&B,...
had a major supply chain problem -- only it didn't know it. The reason, according to Andy Cullen, head of planning and exports, was inadequate business intelligence.
Diageo's Dublin-based Guinness brand exports about 9,000 shipping containers of beer annually. About 60% of them head to the U.S. via trans-Atlantic container ships. Up until about two years ago, the company measured quality of service on the basis of dispatch: what percentage of products got out the door in time to be shipped. Those numbers were quite satisfactory: 99% on time.
But two years ago, Cullen decided to check out actual delivery times to the U.S. He got a nasty shock when his overseas colleagues told him products were arriving on schedule only half the time. Diageo's U.S. organization was compensating for the delays by overstocking warehouses. As a result, a lot of beer sat around getting stale, Cullen said.
His group did some analysis and discovered that the overseas trip from Dublin to U.S. ports often took significantly longer than carriers said it would take. In order to fix the problem, the company needed better data. Cullen turned to SeeWhy Software Ltd., a U.K.-based startup that has developed an innovative take on business intelligence.
Traditional business intelligence systems typically collect data about a business process and then load it into a database or data warehouse. End users must either run ad hoc queries or sift through reports to find relevant data. As a result, the manager with the knowledge to put the data in context, and recognize a problem, often gets critical information too late to do anything about it, according to Charles Nicholls, SeeWhy's CEO. "You're reporting on things after the fact: that you had a bad day yesterday, a bad month last month."
In contrast, SeeWhy Enterprise Edition, officially introduced last June, monitors and extracts data on the fly through direct links to the message-oriented middleware that most applications use to communicate to service-oriented architectures (SOAs) and Web services. The software then interprets the data in the context of past performance and identifies anomalies seconds after they occur. It then either automatically takes action or alerts the right people.
In the past, Guinness' reporting cycle was very much after the fact. "They spent a lot of time gathering data, but not a lot of time analyzing it," Nicholls said.
Diageo chose to outsource its business intelligence system to SeeWhy. The beverage company now has "pretty much a skeleton staff," having outsourced its help desk to Bangalore and its SAP system to Hamilton, Bermuda-based Accenture Ltd., Cullen said.
Diageo uses SAP to track shipments and Manugistics for supply and demand planning. Setting up the data feed from these two systems to SeeWhy was fairly straightforward, Nicholls said. Understanding what was driving performance, and what metrics and factors were involved, took a lot more work.
"We began by putting historical data in Excel spreadsheets, and building a base line on how long a shipment is likely to take," Nicholls said. They found that the shipping companies' own schedules were often inaccurate, providing a set time from port A to port B, even though actual shipping times varied widely.
Shippers often blamed weather for late shipments, but it turned out to be "much less of a factor than we thought," Cullen said. What shippers didn't say was that "sometimes they'd skip the port we were dispatching from in order to catch up on schedule," Cullen said. That kind of information was available either directly from the shipping firm or on its Web site.
In April 2005, Cullen's group took over responsibility for customer service and stock replenishment at Guinness' six U.S. regional distribution centers. "We now control inventory, which means we need to be even more sensitive about whether the Europe-to-U.S. link is working in an efficient manner," he said.
On the plus side, his group now has far better visibility into U.S. warehouse operations. "We can see what stock is there, what's leaving the warehouses when, and can work out a replenishment plan for what's sitting in Europe," Cullen said.
SeeWhy has given Cullen's group the business intelligence it needs to identify the source of supply chain problems and make good business decisions, he said.
The SeeWhy system provides daily alerts that track service-to-date for a given month, and, "importantly, predicts where we will be at month end," Cullen said. "I use this as a management tool for intervening when I don't like the look of the actual or predicted results."
If customer service is at risk, Cullen and his U.S. colleagues discuss options like diverting other shipments to compensate, or transferring stock from another warehouse. If service is not affected, "I confine myself to understanding root cause of lateness and actions to rectify it," he said.
Cullen's group can also use the daily data to "intervene" with the shipping companies, requesting that containers get rerouted if something is off track. For example, if a ship is hit by bad weather and will be late delivering containers to Boston for St. Patrick's Day, operators might direct a carrier to unload more containers in Boston than originally scheduled before going on to the next port. Intervention is rarely needed, however, because "our greater knowledge of shippers, transit times and performance has enabled us to plan more accurately," and proactively, Cullen noted.
Better data on the cause as well as frequency of late shipments has also enabled Cullen to fine-tune his dealings with carriers. "We found that some shippers gave good service, while others were both expensive and unreliable," he said. Jettisoning less satisfactory shippers, Cullen reported, has resulted in critical savings during a two-year period of rising overseas freight costs.
Diageo's investment in SeeWhy more than paid for itself during the first year of use, Cullen said. "WIth our export freight costs over $20 million [U.S.], even a small percentage impact means a big payback. We've definitely saved over $200,000."
Meanwhile, on-time service to the U.S. has gone from 50% to over 70%. Cullen's team members met with their U.S. colleagues in August and agreed that not only was that a good percentage, but that increasing on-time shipments would not be practical. To increase overall service, the company would have to increase the overall number of containers being shipped, and allow exra time for potential delays. "The beer that arrived on time would sit in the warehouse, getting stale," Cullen said. "These are perishable goods."
Cullen is now seriously considering extending SeeWhy to track export shipments across Europe. "At the moment, our supply chain visibility for those markets is limited," he said.
While SeeWhy was originally implemented to address a specific business problem, "the implications are much wider," Cullen said. "It's not just about improving service to the U.S. We've changed how we manage our shippers, our whole supply chain."
Elisabeth Horwitt is a contributing writer based in Waban, Mass. She can be reached at email@example.com.