Art, science and technology are not generally words used to describe spices, but for McCormick & Company, Inc., that is the common thread to improving the universal experience of eating. The manufacturer of spices, herbs and flavorings started in a basement in 1889, when Founder Willoughby M. McCormick and three young workers began selling their flavors and extracts door to door.
Fast-forward to today, and ensuring McCormick’s products are available when and where consumers expect them has made for a much more complex supply chain. That is why about 12 years ago, McCormick embarked on an initiative to develop close, collaborative relationships with a number of its retailers and national food wholesaler customers. This initiative evolved into its customer collaboration platform, which has allowed McCormick to develop formal vendor managed inventory (VMI) relationships today.
Building a Base
For any consumer goods (CG) company, today’s retail and commercial environment is challenging.
Waddell L. Daniels, vice president, North American Demand Planning & Customer Collaboration – Consumer for McCormick, explains, “Supply chains are growing more complex and there is a surge of data available to us. Consumers are shifting their shopping patterns and increasing their use of non-traditional channels. That changes volume patterns. We want to harness this data to improve our operations and ensure the right product is in the right place at the right time.”
Ultimately, McCormick’s goal is to consistently improve its customer service levels while reducing costs, through better utilization of inventory. Part of this collaborative relationship is understanding each of its customers’ goals and helping to meet them. For example, service and cash management goals are common.
“We work hard to be a partner that ensures our customers can achieve them. Logility plays a huge role in helping us do that,” says Daniels.
Additionally, as an organization, McCormick is trying to become more predictive in its forecasting process in order to send the best signals to supply partners. This leads to the right production and the right inventory builds and also provides the right input to the financial forecast.
“As part of our customer collaboration platform, one of the ideas we are starting to activate this year is creating a customer maturity assessment based on four levels of engagement. We want to understand where we are with each customer. Are we at an infancy stage, a growth stage, maturing, declining, etc.?” adds Daniels.
Setting a baseline establishes where McCormick is today, highlights who is the best of the best, and defines what a very mature relationship looks like. For example, McCormick has a formal collaborative process with some companies, while McCormick stewards their entire replenishment process with others.
“Some companies simply send their data to us, and we harness that information to see what is happening with their categories and portfolios, monitor movement across the supply chain, and detect trends and patterns that we communicate back to them. All of the information is used as a leading indicator for how well a particular product is performing at a specific customer or channel,” says Daniels.
The assessment process helps McCormick to understand the opportunities that are available and communicates with customers more clearly to set a path forward. For example, they can ask questions like “Does it make sense to have someone onsite at all times? Which customers should we engage with in an efficiency or optimization program?” Questions like these provide a jumping off point for how McCormick will move forward.
A Dash of Tech
Logility is the primary vehicle for McCormick’s VMI process. The solution allows McCormick to evaluate performance, gives visibility into customer inventory levels, and gives immediate visibility into replenishment needs.
Daniels adds, “Logility allows us to think about how can we better serve our customers and focus on opportunities to drive increased efficiencies in the supply chain.”
The company also leverages the solution provider’s optimization software to help automate many processes.
“Logility’s optimization services have evolved our platform to simplify these tasks and allowed our supply chain team to focus on more strategic initiatives,” Daniels explains.
One such initiative is the establishment of trust, both internally and with customers. It is an important challenge for McCormick.
“In a collaborative relationship, you must have trust in three things: the process, the data and the people you are working with. Our customers allow McCormick to act as their procurement arm for a particular category, in order to free up their own purchasing and replenishment teams to focus on other projects with their organizations,” asserts Daniels.
As the programs evolve with each customer, McCormick builds credibility. Customers realize the benefits and experiences improved service levels and reduced inventory requirements. Thus, earning their trust leads to a strong working relationship.
Sifting Through Data
McCormick utilizes several different types of data from its customers, depending on the maturity of the collaborative relationship. In some cases, McCormick receives point-of- sale (POS) data that drives its forecast and the replenishment needs. For less mature relationships the company receives EDI 852 data. In some cases, access to a portal is needed, where McCormick has to mine through the data.
“Working with various levels of data leads to the challenge of data integrity. About four years ago we embarked on an initiative to simplify the cleansing of this data,” says Daniels. “We’ve made significant progress in validating data on the front end so we can quickly integrate that information into our systems. We use data analytics to come up with solutions that are beneficial for both parties.”
McCormick can now identify the collaboration opportunities that exist with the customer, as well as any pain points that need to be solved. Then, the company uses its visibility to key metrics and prediction capabilities, in order to analyze the best course of action.
At McCormick, the sales and supply chain planning teams work very closely together, which is key. The collaborative relationships give the teams access to more information, which helps identify new opportunities to offer new products, change the mix of current products, better forecast the impact of a promotion, and so forth.
“We help our customers improve their service levels while right-sizing inventory. That is huge, and as we develop closer relationships, we have an even greater impact on these two metrics,” adds Daniels. “We have seen a reduction in both customer returns and obsolete inventory. These benefits can have a significant impact on a company’s cash management.”
Further, many of McCormick’s customers’ replenishment leaders rave about efficiency, analytical capability and the ability to improve their buys. For example, one customer used to buy daily from the same location, causing less-than-truck-load shipments. As their relationship grew, they began to trust McCormick’s recommendations.
Daniels explains, “We worked with them to consolidate orders and minimize shipments to only twice a week. This led to more optimized purchase orders, decreased shipment costs, and a reduction in the number of receiving appointments, among other benefits.”
Collaborative relationships also allow McCormick to be highly responsive to its customers’ changing needs and shifts in consumer preferences. In most cases, demand signals are received on a daily basis. This allows quick sense and respond, ensuring help to customers so they can serve their distribution at the highest possible service levels. McCormick can then directly measure the performance of its VMI program by seeing how well its customers’ distribution centers serve their stores.
Kneading the Right Talent
What really makes the customer collaboration platform a success is the supply chain team at McCormick. The average tenure of business experience on the team ranges from 10 years to 30 years, and these professionals go beyond managing relationships — they nurture them.
“As you can imagine, being customer-focused is a key quality for us. When I think of talent, I think of skill sets that will enable our supply chain professionals to be successful,” says Daniels, offering these three key components in building the right team:
• First, they have to have strong analytical skills and think critically about data. “How do we take data and convert it to information, then into insights, and then tell a story around it?” McCormick holds a supply chain summit to help identify how best to tailor the story based on the audience, from the president to the employee on the factory floor.
• Second, it is critical each member of the team is able to develop and grow relationships both internally within McCormick and externally with partners and customers.
• This leads to the third quality: Customer focus. The team must stay in tune with each of its customers. Each customer is unique and each member of the team must be able to align with their needs and be an advocate for them and McCormick at the same time. That is a unique skill not possessed by everyone.
Daniels adds, “I see every individual as a leader. They must leverage several internal partners to satisfy the needs of a customer. We are also trying to figure out how best to cultivate our associates’ understanding of the importance of diplomacy.”
Baking in the Best Practices
In addition to acquiring the right talent and building their skills, Daniels offers some tips and tricks learned along the way.
First and foremost, a strong collaborative initiative starts with the right people. Daniels believes that you need a strong team that understand and believes in the effort. At McCormick, the team has built strong relationships with customers. With these relationships, it can achieve credibility with customers, which enables the ability to earn their trust.
“But once trust is earned, you become an extension of your customer’s business. That is your goal — to be an indispensable part of your customer’s business,” he says.
Another goal is to align with your commercial and sales organizations around the collaboration. Together you can identify where opportunities exist and the potential benefits for all parties. Once you have established a more intimate relationship, you can move beyond traditional category management to achieve the next level of benefit.
And finally, it is important to establish a set of guiding operating principles that everyone understands and can collectively work toward. McCormick has divided its principles into two groups: the how and the what. “How do we do our jobs, how do we communicate with our customers, how do we follow up, how do we clearly capture, understand and plan what our customers are looking for?” These are just some of the questions the team continually asks. Those are the inputs. On the output side McCormick looks at service, efficiency and the optimization of the customer’s supply chain. In the end, you achieve the what only through the how.
As for the future of the platform, “We are constantly evaluating how we can increase our utilization of the technology we have in place. We work closely with Logility to further optimize our use of the solution and drive even more benefit for our customers,” closes Daniels.