Godiva Savors Lower Inventories and Better Service Levels with SmartForecasts

Godiva Chocolatier is a household name in the food industry synonymous with high quality confections. The company, a wholly-owned subsidiary of Campbell Soup and part of its $1.8 billion Biscuit and Confectionery Division, has manufacturing facilities in Belgium and Reading, Pennsylvania. The company has more than 250 retail stores in highly visible locations worldwide and a presence in about 1000 additional upscale retail outlets.

Demand for the company’s sweets is year ‘round, but peaks at holiday times such as Christmas, Valentines Day, and Mothers Day. With a highly seasonal product, Godiva uses SmartForecasts as a critical component of its production planning to make sure that its production assets have optimal utilization and that the right product is on the shelf at the right time. Since they started using SmartForecasts, Godiva’s inventory and stockouts are down while forecast accuracy and on-time product shipments are up.

The Challenge
When Archie van Beuren became president of Godiva Worldwide in the fall of 2000, he was confronted with several challenges. Godiva’s plants were underutilized, and the company lacked a dependable and organized demand forecasting and planning process.

According to Karen Jensen, forecasting manager at Godiva, “The forecasting process was a mess! No one was in charge.” Several people in each marketing group were responsible for a forecast. There was no coordination of their efforts and no forecasting tools to help them. Manufacturing would receive demand requirements from marketing, but Jensen noted, “There was no rhyme or reason for the numbers.” Needless to say, production was neither smooth nor efficient.

The Solution
van Beuren, the new president, had a keen interest in and appreciation for the importance of forecasting. The ensuing months following his appointment saw a number of important developments happen. Among them, the company purchased the SmartForecasts demand forecasting and planning software. It was chosen because it was easy to use and provided a better value for the investment than the software’s competitors. Godiva also invested in a homegrown collaboration capability that enables the marketing people to share, review, and provide feedback on the baseline forecasts that SmartForecasts produces.

Due to strong management commitment and hard work, today SmartForecasts is driving an improved planning process that is helping Jensen better manage a much improved and smoother forecasting process at Godiva.

Godiva generates its monthly forecasts using three years of demand history, stored on the company’s IBM AS/400 system, to forecast out eighteen months. The forecasting process involves importing corporate data into SmartForecasts that reflects the demand history for 10 customer types (Large Wholesalers, Book Stores, Military, Institutions/Hotels/Hospitals, Mail Order, etc). The resulting baseline statistical forecasts generated by SmartForecasts are exported to the AS/400 and then distributed via the Web to product managers who can make manual judgmental adjustments based on additional market information they might have. The resulting consensus forecast drives the manufacturing planning system.

The Results
Expansion and strong sales growth helped solve Godiva’s over capacity problem. Godiva now is in the envious position where, at certain times of the year, demand outstrips its ability to produce. SmartForecasts is essential to the management of the peaks and valleys of its inventory requirements and production asset utilization. The improvements in forecasting have paid off.

In three years, forecast accuracy has improved from 50 percent to more than 80 percent, a dramatic 60 percent jump in reliability. As a consequence, Godiva:

• Reduced stockouts by 3%
• Consistently maintains a 99.5 percent service level
• Cut inventory levels by 3.5 percent, a $2 million savings over 3 years
• Reduced obsolete inventory write-offs $400,000
• Increased shipments by 4.1 percent
• Lowered warehousing costs $350,000 anuually

The combination of SmartForecasts and the ability of production and marketing people to collaborate have been instrumental in achieving Godiva’s success. As Karen Jensen notes, “SmartForecasts gives us control over our forecasting process and enables us to better manage our inventories, production and asset allocation.”

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