Juggling three major external challenges in a year and coming out strong
Recently, Matthew Shoard, Financial Controller, Casella Family Brands joined us for a webinar to discuss the recent macro events that affected the business plans. Here's what he had to say;
As the name suggests we're a family-owned winemaker from Australia, we’ve got several brands including Peter Lehmann and [yellowtail].
We use Anaplan for three main use cases, sales forecasting to establish demand for our product, supply planning, which is matching supply to that demand and then long-term financial forecasting.
So, what's happened in the last few months? How have you reacted and coped with some of the challenges?
I guess what hasn't happened is maybe the better question! We've essentially had to overcome three big external challenges, one after the other namely Brexit, the pandemic and more recently the Suez Canal blockage.
As an Australian wine supplier, our lead times are long, compared with most businesses e.g. it’s about 16 weeks from the point at which we order the wine, get it shipped to the UK bottled and undertake quality control before we can get it in the hands of our customers.
Short-term pivoting is quite difficult for our business, so we’ve had to find intelligent ways around the three challenges.
We all knew it was coming but we weren't clear on what the rules of the game were or what the trading environment was going to be. That’s especially true in the complex world of importing and exporting something like wine. A product that is subject to tariffs, excise duties, regulations and a lot of accompanying paperwork.
Our plan was to build three to four months of stock with our European customers and distributors to ensure that we had sufficient buffer stock to cope with any issues that would occur, ahead of the end of the Brexit transition period in December 2020.
However, building a substantial level of stock has implications for working capital, cash, and cash flow. Anaplan effectively helped us calculate what that additional working capital requirement would be.
As we saw it coming closer and closer to the UK, we had some time to take evasive action, especially as our lead times don’t allow for big swings in demand.
The hospitality trade, over the last 12 months has dropped back to virtually zero or been substantially restrained by COVID rules, however, we saw a big increase in at-home wine consumption.
During the period of supermarket panic buying, we used Anaplan to help us walk the tightrope between maximising sales but not going out of stock. We used our forecasting model to accurately calculate and manage our stock levels at any given time.
We typically carry eight weeks of buffer stock, below that, we’d run a risk as a delay with a vessel or in a production facility we’d be out of stock. During the panic buying period, we took the decision to go down to three or four weeks of stock to accommodate the additional demand as well as limited promotional offers.
Because of our trust in the numbers, we were able to resist the temptation to oversupply and keep pace with demand.
Of course, in the background, we were increasing the levels of dispatches from Australia, so we had a period of 12 to 14 weeks of having to manage that tightrope, but then we're able to catch up.
The Suez Canal blockage:
This was more like disaster recovery.
[yellowtail] is the number three wine in the UK. All our wine comes from Australia to the UK via the Suez Canal. We had one ship stuck in the canal and three or four more en-route from Australia.
There was real uncertainty, as news reports said that it could be stuck for weeks. What complicated matters further, was that our containers were on ships not managed by us, so we had no control to suggest a different route.
We typically plan our supply based on the vessel arrival, but that was the information that was up in the air.
We did various scenario plans, with different “what if” options. In practice, we created a copy of our existing model, but did various options with two, four or even six-week delays, to understand the impact on our existing stock levels. At what point would we run out of stock or need to pull in-store promotions?
Given the complexity of the work, at a product level, we never would’ve been able to do it on a spreadsheet. As a result, we were able to establish different options for each delay scenario.
Combining the work on Anaplan, our cross functional teams were able to create action plans and communicate all options with our customers.
In the end, there was still a four-week production delay. However, we were able to maintain supply throughout. Importantly, our customers gave us great feedback on how proactive we were and the speed of our action recovery plan. We were the first supplier to come back with detailed plans.
The recent business disruptions have proved our ability to plan. Instead of spending 90% of our time crunching the numbers and 10 % running around in a panic, deciding what to do. We could spend 90% of our time action planning and communicating.
You need to give yourself the space to plan, and that’s what Anaplan does.
To watch the on-demand version of this webinar please click here.