Home: Issue 4 2010 › Cover Story › Beyond average
31/05/2010 | Channel:
The recession highlighted many companies’ lack of ability to accurately keep stock of their wares or estimate demand. Pam Kaur speaks to Robert F Byrne, president and CEO of a company that has come to the aid of several giants in the industry that have fallen foul of the same mistake
As the recession wave surged through the industry, it seemed to bring with it a stream of reactions from businesses – some acted with a knee-jerk, some rolled over, but most took the ‘opportunity’ to look deeper into the organisation and address issues that have gone unnoticed while the sun shone. This was a necessary step to ensure that the economic turmoil did not cripple their businesses more than it already had. Time and time again, these companies realised the issues that needed addressing seem to involve inventory. The crisis successfully showed up the flaws in their current system and it didn’t take long to recognise that they had either forecast too high a demand or underestimated it significantly. They were in desperate need of help to keep their heads above water; and for some of the giants in the industry, that help came in the shape of Terra Technology.
Terra Technology is the most-trusted provider of innovative supply chain solutions for consumer products companies, and is no stranger to the likes of Procter & Gamble, Unilever, Kraft Foods, Kimberly-Clark, ConAgra Foods and Campbell’s Soup. With an impressive client base, I was determined to speak to the man behind this successful reputation – Robert F Byrne. Robert’s career in supply chain started off in Unilever back in the 1980s, before he moved on to James River and then to Numetrix in 1996. In 2001, Robert and three friends from Numetrix decided to form Terra Technology.
Robert took me down his career path to where he finds himself today: “It was quite tough when we started out, as March 2001 was probably not the best climate to start a new technology company. We were adamant to not have any venture capital, despite how challenging we knew the journey was going to be. So we bootstrapped the company and worked very hard to consult by day and develop software by night – it was very draining but rewarding as we finally launched our first demand sensing product in 2002, which has continued to be our flagship. All our efforts paid off when in 2003, we obtained our first customer – Campbell’s Soup – and gained a little momentum. In 2006 we signed a global licence agreement with Procter & Gamble, which really put us on the map. In the last three and half years, Unilever, Kraft Foods, ConAgra, General Mills and Kimberly-Clark all joined our clientele list. All of these combined, helped launch our company forward significantly, as from the 11 people we had onboard when we signed with Procter & Gamble, we recently hired another 13 bringing our total employment figure today to over 60.”
Terra Technology’s solutions use better mathematics and downstream data like POS to improve supply chain performance, reducing forecast error up to 50 per cent and inventory up to 20 per cent. “We offer very accurate short-term forecasting, which are mostly sales predictions,” Robert continues by describing Terra’s operations. “Most traditional forecasting systems provide average sales figures for specific times of the year, working to seasonal models – ice cream sales rocket in summer and winter pushes up the sales for sweaters. When you are in an economic crisis situation, seasonal models are just unreliable and not an option for inventory management or demand forecasting. We decided to focus much more on what’s happening right now in a business, what wares are you holding, what inventory the retailers have and what’s actually selling in the store.”
He carried on explaining how there is just no room in the industry for over speculating or taking anything for granted. “Campbell’s Chicken Noodle Soup, for example, has been selling for 110 years, it’s not teen fashion or electronics, but there’s still tremendous volatility,” he adds. “Another prime example is one of P&G’s products, Puff tissues – Kleenex’ competitor – which had a huge surge in demand with the rise of swine flu. For obvious reasons, this wasn’t predicted by historical sales, but we picked up on it because you could see packages were flying off the shelves, and you knew retailers were going to reorder soon.
“There is of course a flip side of the recession – most of our companies are branded companies, and consumers were forced to switch to private labels, which had a direct impact on some of our customers. The key in surviving such a crisis is being able to anticipate by understanding your demand better and what your customers are going to do, which will really help you be more efficient. The less things look like historical averages, the more useful we are.”
Always keeping up with market needs, Terra constantly works hard to ensure it is ahead of trends which in turn keeps its customers ahead of their game. It has recently launched a revolutionary product – transportation forecasting. Keen to explain this new offering, Robert adds: “Let’s use Procter & Gamble as an example. On a daily basis, it receives hundreds of orders from customers that are bound to be shipped the following day; so carriers are lined up to depart the warehouses to ensure next-day delivery, but this whole scenario repeats itself the following day. Clearly there is no real ability to plan ahead – you don’t know if three weeks from today you’re going to be running a giant promotion with one of the major retailers, unless someone informs you in advance. So from a normal requirement of 15 trucks that day, suddenly you realise you now require 30.
“The usual scenario is that transportation is organised following a reaction nudged by need – there’s an order, it has to be shipped and a carrier has to be arranged to deliver it. How our new product will be able to assist to plan a little better and have some visibility into what’s going to happen next week, is through some advanced notice.”
Having been in the industry for as long as Robert has, I was keen to find out how he has seen it evolve: “Turn the clock back two years, everyone was focused on growth and emerging markets. But then the recession meant that sales in developed markets halted and everyone was quick to turn their attention to growing the bottom line instead to cut costs. Recently we’ve seen a much more balanced approach – companies want to grow but they’re focusing on taking costs out of the system to free up cash in the credit crunch. I believe we are probably going to see another shift; the pendulum will go back the other way, as people try to focus more on the emerging markets that have been recovering faster. Whether or not they are going to be able to recover all the shares they’ve lost to private label is something we’ll just have to wait and see.
“Someone made a comment recently that if inventory is going to go down, the only people who will change that are in the supply chain; so supply chain has gained more prominence recently, and I believe this will remain the case far into the future. I think people are really beginning to realise that there are a lot of costs involved in inventory and so there are a lot of opportunities tied up in this segment. When I was at James River, there was a huge political power in either marketing or manufacturing – manufacturing had the plants and the mills, marketing had the budgets, and supply chain was the glue that held everything together but we were never the priority for people. I strongly believe that the recession has been a silver lining in the supply chain industry’s cloud. We recently had one of our very large customers tell us that we were their number two strategic priority and when any supply chain project is your number two strategic priority in your consumer-packaged goods sector, instead of marketing or sales, it’s truly something for us to be very proud of!”
Terra Technology has been constantly expanding since its inception and today has four offices to its name – its headquarters in Connecticut; one office in Chicago; one in Bracknell, just outside London and the newest opening in Brussels. The company was recognised several times in the first quarter of 2010, when it was acknowledged by Consumer Goods Technology magazine as one of the top five supply chain planning vendors, for the fourth consecutive year, and once again listed as one of the Food Logistics Top Technology providers. I admit that, while I have worked with Robert on ESCM magazine over numerous issues and have always secretly admired his success, I was determined to interview Robert when he was named as one of Supply & Demand Executive’s 25 Pros to Know. But as modest as he was about the success of Terra Technology, so was he of his own achievement: “I must say I was tickled when I heard it. I don’t really consider myself as an entrepreneur – yes, I am running a company that I formed with three partners, but I’m really a supply chain guy at heart. But this recognition is obviously appreciated, as it’s nice that at least in our little industry people know who I am and respect me.
“Despite this achievement, I don’t feel like I’ve accomplished everything I set out to do. When Terra Technology was formed, I had a vision to secure six strategic accounts – today three of those are our customers and so there’s no room for us to rest on our laurels just yet. I believe there are still needs in the industry we want to meet – I am not overly concerned about growth for growth’s sake because for me what is paramount is my customer feeling valued and satisfied with the services received. You have to remember that word travels fast.” I can’t agree more with Robert, as I strongly believe that the word of his personal achievement and Terra Technology’s success is fast travelling through the arena of the supply chain industry.