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Sainsbury's and World Flowers - tackling volatility to reduce waste
09 Nov 2011

Sainsbury’s and World Flowers have worked together to tackle volatility, order processes and waste within the floral category. By introducing a new process to fix orders and extend lead times, contingency stock in the supply chain has reduced and product life on-shelf has increased.

Background

Sainsbury’s is targeting zero waste to landfill and has just achieved a milestone in this project by announcing a new contract with Biffa, whereby all food waste is sent to anaerobic digestion plants.

As part of the retailer’s work on waste it is also committed to reducing the amount of waste that is created by being more resource efficient. Sainsbury’s achieves this through better stock control management and more accurate sales forecasting.

Excess food is discounted and sold to shoppers or if this is not possible is donated to local charities like FareShare.

What is left is true ‘waste’ and is sent, through the contract with Biffa, to anaerobic digestion plants that turn the food waste into renewable energy.

However the first stage for Sainsbury’s is to reduce waste that is created in the first place and one of the categories the retailer focused on was the floral category.

Floral is typically a low volume, high value category subject to fluctuating and unpredictable demand that can result in high levels of waste.

Through a collaborative programme, funded by WRAP and facilitated by IGD, Sainsbury’s partnered with its flower supplier World Flowers to reduce waste in the supply chain.

World Flowers is part of the Mavuno network of companies that produces, sources and supplies fresh cut flowers.

Aims and objectives

The aims of the collaborative project were to:

  • Map the forecast to order process for flowers
  • Identify what the ‘real’ consequences are of inaccuracies in the forecast
  • Implement a trial of different forecast/order processes
  • Reduce waste, improve availability and reduce costs

Key milestones

Mapping the process

Kenya, with approximately 5,000 flower growers, is a leading supplier of flowers to the European market accounting for a 38% share of flowers sold.

The flower industry is the second largest foreign exchange earner for the country. And of these 5,000 growers, around 40 producers account for 75% of production and export.

However, in this supply chain air freight costs are a significant element, comprising around 40% of total costs.

Sainsbury’s–World Flowers supply chain map

Sainsbury’s and World Flowers established a team to jointly map the forecast to order process and identified a number of consequences arising from any inaccuracies.

Above forecast Below forecast
  • More product is ordered to maintain stock levels in UK
  • Less products are harvested to avoid over stock and holding time of product
  • Airfreight is more expensive as smaller amounts are shipped
  • Colour mixes more difficult to achieve as some farms not able to react quickly
  • Product not at correct cut stage therefore requires conditioning, which is an extra handling cost
  • Too much stock in the system which is moving towards the end of its holding life
  • This older stock [though in spec] has potential to affect quality
  • If stock is not used in time it is thrown away in the UK having had all the associated costs applied
  • Supply chain again becomes inefficient as orders are cancelled or delayed

Once the consequences of inaccuracies in the order and forecast process were identified, the team decided to trial putting fixed orders and flexi date code on two products, these were the Sweetheart Roses and the Rose and Carnation Posy.

Establishing fixed orders

The change involved forecasting the volume for each line for each day in the week and then fixing orders initially at 80% of volume.

Any daily requirements below the fixed level are increased to the fixed order level.

Any daily requirements above the fixed level are honoured by World Flowers.

Sunday is kept as a potential no-delivery day to allow re-balancing of in–store stock levels.

Sweetheart volume and availability

Sweetheart in store waste JS Year 2010

The Sainsbury’s – World Flowers team have implemented a number of other key actions to reduce waste:

  • Better stock take
  • Introduced a more stable range
  • Merchandising planners for stores
  • A new tier of products into good/better/best

Key benefits

Since the new approach was implemented overall store waste has stabilised.

To date, both companies have experienced a smoothing of the line for orders versus forecast and a reduction in total waste.

The impact of fixed orders on the two lines has:

  • Stabilised orders and their phasing
  • Improved product supply chain from grower to fixture
  • Reduced waste in-store, at the factory and with grower

The reduction of contingency stock in the supply chain has resulted in:

  • Improved vase life of product and fresher product on shelf
  • Fuller more abundant fixture enhancing consumer choice
  • Best until date improvement giving consumers confidence and encouragement for repeat purchase

Sainsbury’s–World Flowers fixing orders – what has changed?

Before the programme After the programme

Fixing 7% of core lines

In-store waste erratic

Order fluctuations huge - line efficiencies effected:

  • Too much product ordered little and often and was not efficient
  • Too little product and large amount of waste in UK
  • Poor communication and lack of confidence in numbers

Fixing 15% of core lines

Store waste has stabilised

Orders fluctuation still prevalent

Shared forecasting has built knowledge and trust into the partnership

Results

The key change from this project was the introduction of fixed order quantities, providing greater predictability across the supply chain.

The Sainsbury’s – World Flowers team estimates that a 15% improvement in waste is worth around £12,000 per week.

A further reduction in waste of 15% is also made in the upstream supply chain, with benefits comprising savings in air-freight, reduced stock holding and improved factory efficiency.

During 2011 a top level reduction of 222 tonnes of waste per week has been achieved as a result of the programme.

Next steps

Sainsbury’s and World Flowers believe that the programme can be extended to include other flowers and would like the approach to be extended across Sainsbury’s entire core range.

This would account for 50% of the total floral category and would drive out the true benefits to both businesses.

The commercial benefits of the programme, which include labour savings, air freight, factory efficiency and lower stock holding, will continue to drive new ways of working and reduce waste.

Sainsbury’s also believes this project can be rolled out to other categories and is currently considering a trial for fresh produce.

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