Cafedirect Forecasting Systems case study

The Company

Cafédirect markets a fair-trade range of coffee, tea and drinking chocolate to both major retailers and caterers.

The organisation is structured in such a way that allows a number of operations to be outsourced to external parties, such as the sourcing, roasting, packing, selling and delivery of its products.

Cafedirect has experienced significant growth over the past few years, and anticipates growth rates of 20% for 2003.

The Forecasting Problems

Their spreadsheets (and employees!) could not cope with the increased complexity of the company, resulting from rapid growth and the increased product range. For example, weekly forecasts were essential to promotion management, but could only be performed monthly.

Inventory problems and short deliveries to supermarkets were increasing.

Existing systems were highly labour intensive, difficult to maintain, lacked transparency and were very slow to identify key changes in demand.

Existing systems could not merge data from other sources meaning that a total sales figure was difficult to obtain and a sales breakdown impossible.

It was becoming increasingly problematic for Cafédirect to share the right information with its key partners.

Also, partners such as packaging companies were unable to synchronise with Cafédirect due to a lack of data.

The Results

Total sales visibility was immediately achieved, allowing Cafédirect to explore sales from many different viewpoint s. Efficiency and reaction time improved almost overnight!

Time and effort has been redeployed into other value added activities, as the forecasting function now requires much less labour time.

External partners now receive data weekly by email automatically, which they can analyse interactively and then act on-thus increasing responsiveness.

Cafédirect now know within the week of any deviations, upwards or downwards, from the forecasts.

Furthermore, the enormous reporting flexibility of the system has been recognised throughout the organisation. For example, the marketing department are now employing the system for a host of other uses.

The system is also being used with other systems to ascertain the 'true' cost of all promotions. The features of the system have also allowed easier planning of new product launches.

Why not use a Traditional Forecasting System?

Cafédirect took the following characteristics into account:

• Cost-prohibitive - systems can cost in excess of £50k, or even upwards of £150k - and that's before implementation!
• Traditional systems often take a long time to become fully funct ional (many need to build up history etc).
• Often cannot incorporate promotions, even though these have a huge impact on forecasting.
• Traditional systems may not offer multi-dimensional reporting, and so are slow to identify key changes and deviations.
• Many do not contain live alarming and other special features which businesses experiencing rapid growth need.
• Often cannot merge data from external sources such as outsourced trading partners.
• Many traditional systems cannot be used off site.

The Pilbeam Diagnosis

Cafédirect required an integrated user-friendly forecasting system, which offered cost -effectiveness and speedy implementation.

In addition this customised system needed to cope with the special needs of food and beverage producers who supply supermarkets.

The system would provide Cafédirect with:

• A unified view of sales (from disparate systems), with the ability to perform ad hoc detailed breakdowns
• The ability to acquire this data from external systems regularly and automatically
• The ability to control how the external data is merged and classified in a simple and user-friendly manner
• The ability to forecast by the two perspectives of customer & product
• Incorporate stock takes from external warehouses
• Automatic ordering recommendations
• The ability to export to spreadsheets in a user-configurable manner
• Performance deviation alerts with thresholds which can be set by product and customer
• The ability to combine both historical data and market intelligence, including promotional planning
• The ability to take product performance from Customer A and transpose it at a different level to Customer B, capturing seasonal variations and subtracting promotions
• The ability to learn from mistakes
• Alerts for incomplete data
• Multiple calendars allowing Cafedirect to work from, for example, Tesco's calendar versus internal

The Plan

The plan was to develop a bespoke forecasting system capable of integrating both existing and proposed future systems, taking into account best practice from top of the range expensive systems and the experience of Pilbeam consulting partners.

A fixed budget and delivery programme were agreed.

A simple and down to earth method of planning was employed in order to develop comprehensive user specifications

As each key milestone was achieved the system was tested with Cafédirect staff.

A full programme of training and subsequent support was agreed to ensure the project's success.

The project was successfully delivered within budget.