Church & Dwight Improves
Forecast Accuracy, TMS
By Jack Grant
The Arm & Hammer brand is widely recognized in American households as the trademark for quality consumer and specialty products that include toothpaste, household cleaners and air fresheners in addition to its popular baking soda.
But the maker, Church & Dwight, needed to overhaul its supply chain to manage its wide assortment of stock keeping units (SKUs) better. Growing demands from retail partners and the need to optimize inventory led Church & Dwight to pursue technology that would drive improved planning and forecasting. Since the company’s distribution accounts for a high percentage of sales, it also focused on reducing transportation expenses.
To satisfy these business objectives, Church & Dwight replaced its in-house systems with several new branded solutions to handle forecast planning and transportation management.
The company is using its new fulfillment solution to increase visibility into key retail accounts throughout the world – not just at a regional level. The solution generates accurate forecasts by assessing several years’ worth of sales history, and also takes into account Church & Dwight’s heavy reliance on promotions.
“When I consider Church & Dwight’s supply chain, I realize that we were very much like our competitors in the 1990s.We have since taken on a completely different strategy that is really helping us to set ourselves apart from our competition and become leaders in the industry,” said Sam Dragotta, Church & Dwight’s senior director of supply chain. “Over the last several years we have acquired five different companies, and we’ve leveraged [new] solutions to improve our forecasts and begin planning our new products in a way that is excellent for execution.”
The company now relies on forecast planning and transportation management solutions from JDA Software Group, a leading supply chain solutions provider.
Improved customer service levels and inventory control as a result of better forecasts have allowed Church & Dwight to grow its household product offering by 67% while reducing inventory levels by 10%. The company also leads the consumer goods industry in inventory turns with about 12 per year.
“We know that forecasting is the root of good deployment and good production planning,” said Dragotta, who listed three benefits:
- Case Fill In the late 1990s, the rate was in the low 90 percentile. Today it is at 99.5 and above for many weeks in internal case-fill metrics.
- Deliveries Deliveries were only 82% on-time and full to our customers in the early 1990s. Now they are in the 89 to 90 percentile range for on-time and full deliveries.
- Days of Supply The company has reduced days of supply from 80 to 55 days.
“We have successfully reduced days of supply by several million dollars even though we have since added SKUs and brands,” said Andrew Pignatelli, Church & Dwight’s supply chain planning manager, who attributed this to the ability to set safety-stock levels, which indicate when to produce at the correct times.
Meanwhile, the transportation management solutions have provided Church & Dwight with a method for planning both inbound and outbound shipments, as well as the ability to merge inbound loads from raw-materials suppliers with outbound shipments. The company is also leveraging the solution to manage semi-fixed trips, enabling the consolidation of shipments even after they have left the warehouse.
Boosting carrier capacity is also key for Church & Dwight. Even when carrier costs were increasing, the company was able to reduce transportation spend in certain areas, as well as successfully negotiate rates with its carrier base. The solution has provided Church & Dwight with an alerting capability, which signals when forecasts and shipment schedules are out of balance, and also enables the carrier selection process to be automated.
Prior to installing the new software, Church & Dwight’s selection process was manual; the company would request carrier quotes, select a number of companies via the Internet and then conduct the bidding on a lane-by-lane basis. Church & Dwight is now able to select the best carriers according to service levels, capacity and cost. The system can also support spot bidding if the sudden need for more capacity arises, and carriers may bid on full or partial shipments or make an offer that ranges across multiple lanes.
FEBRUARY 2010
Pallets under Scrutiny after
McNeil Recalls OTC Products
By Dan Alaimo
The pallet contamination that led to a massive recall of Tylenol and other McNeil over-the-counter (OTC) products last month is causing all participants in the supply chain to take a closer look at the composition of pallets, and how they are maintained.
The recall has spawned questions for OTC drug companies and the pallet industry, as well as concern among consumer packaged goods food manufacturers.
The Food and Drug Administration has questioned whether Johnson & Johnson acted quickly enough in recalling products. The problem was reportedly discovered in 2008, but the recall began in November 2009, was expanded in December 2009, and reached multiple product lines and international markets last month. McNeil Consumer Healthcare, Fort Washington, Pa.,
is a subsidiary of Johnson & Johnson, New Brunswick N.J.
In the pallet business, iGPS, Orlando, Fla., a plastic pallet pool company, has taken the opportunity to promote tests it says show that contaminants were found on many wood pallets, and is urging FDA to regulate them. Meanwhile, the wood pallet industry says that fire retardants in plastic pallets represent a danger if they break down and migrate to the products on the pallets.
“To be clear, CHEP pallets were not involved in the Tylenol recall in any way, but the incident has brought to light the critical importance of rigorous testing and quality control processes for shipping platforms and the materials used in them,” said Jim Ritchie, president of CHEP USA, Orlando, Fla., in a letter posted on the company’s Web site.
“Whether the pallet is wood, plastic, or some other material, all pallets may be exposed to various chemicals and debris as they move through the supply chain, and therefore should be inspected after each use,” he noted.
Prior to the recall, CHEP USA, which is by far the largest wood pallet pool company, launched a “Better Everyday” program last fall that aims to improve its service, quality and technology over the next five years, said Derek Hannum, director of marketing.
McNeil initially recalled Tylenol Arthritis Pain Caplet 100-count bottles “with the distinctive red EZ-Open Cap” from certain product lots on Nov. 6, 2009. The company said it had identified
an uncharacteristic smell or taste that led to consumers reporting nausea and related symptoms. On Dec. 18, 2009, McNeil expanded the recall to all available lots of the product. On Jan. 15, 2010, a far longer list of products – including Saint Joseph Aspirin, Rolaids and Motrin – was recalled, and international markets such as the Americas, United Arab Emirates and Fiji were added.
According to a statement from McNeil: “The company is initiating this recall following an investigation of consumer reports of an unusual moldy, musty, or mildew-like odor that, in a small number of cases, was associated with temporary and non-serious gastrointestinal events. These include nausea, stomach pain, vomiting, or diarrhea.”
McNeil said the smell was caused by the presence of trace amounts of a chemical called 2,4,6-tribromoanisole. “This can result from the breakdown of a chemical that is sometimes applied to wood that is used to build wood pallets that transport and store product packaging materials.”
The company said it is continuing its investigation, “and is taking further actions that include ceasing shipment of products produced using materials shipped on these wood pallets and requiring suppliers who ship materials to our plants to discontinue the use of these pallets. We will continue to closely monitor and evaluate the situation and consult with the FDA,” the company statement added.
Plastic pallets are an answer to the problem, according to Bob Moore, chief executive officer of iGPS, and a former top executive at CHEP. iGPS is the largest plastic pallet company in the world, and has been critical of the porosity of wood pallets.
“Organic wooden pallets are porous with lots of cracks and crevices, and maintain a lot of moisture. It’s a great place for bacteria to grow.” For a multi-million dollar brand, which a consumer packaged goods company has spent decades building, “an e-coli, listeria or salmonella outbreak can do severe damage to that brand,” Moore said.
Plastic pallets will grow “because we can take plastic where wood isn’t,” pointing to the pharmaceutical industry as an example. “Plastic is ideal for them because of the high value of the goods on the pallet.” The plastic pallets also have GPS units built into them, which facilitate tracking and tracing, also a concern for pharmaceuticals, he added.
Meanwhile, legislators are pushing for a ban on decobromine, a fire-retardant chemical that could leach and prove hazardous in a fire, noted Bruce Scholnick, president, National Wooden Pallet & Container Association, Alexandria, Va. This is present in many plastic pallets, as well as other products. “At some point in the not too distant future, iGPS is going to have to find an alternative – and far more expensive – flame retardant if they are going to maintain their fire rating,” he said.
Moore noted that independent laboratories have conducted “extensive testing” on iGPS pallets, and there has been no migration of decobromine. It is “absolutely safe.”
Hannum of CHEP, which has 85-90% of the pallet pool business, said, “We have evaluated practically every commercially available option out there. Our view is that none {of the alternatives} have proven to solve the complex equation of durability, strength and performance over time that pooling demands – and at a price point that the market is willing to accept.”
In his letter, Ritchie commented: “As the provider of the world’s largest pool of reusable shipping pallets, CHEP has an obligation to design and maintain strict and comprehensive quality control procedures for our platforms, which are classified as tertiary packaging. We believe our processes meet the most exacting standards for control and assurance, for everything from raw material to pallet repair and recycling, and we invite our customers to evaluate these processes for themselves.”
PECO Pallet, Yonkers, N.Y., follows CHEP in the wooden pallet pooling business, and Adrian Potgieter, vice president, sales, said PECO has had no problems with bacteria in wooden pallets. “Our focus is the food and CPG industry,” he said.
PECO is set apart from other pallet companies because of its standards for initial production, inspection and maintenance, he explained. “Our pallets don’t get reused without being inspected to a standard, and then they are maintained through a set of processes to our published standards before they are reissued and reused by a renter,” Potgieter said.
