April 18, 2024

Blue Diamond Invests In SAP To Improve Their Supply Chain

Blue Diamond is the largest almond processor and marketer in the world. To fix their supply chain, the company implemented SAP’s Transportation Management (TM) and Logistics Business Network (LBN) solution to complement their SAP Integrated Business Planning (IBP) solution. For Blue Diamond, bringing together demand and supply planning with real-time logistics visibility led to benefits bigger than any one solution could have provided.

The Blue Diamond Supply Chain

Blue Diamond Growers is a grower-owned cooperative representing approximately 3,000 of California’s almond growers. Headquartered in Sacramento, the company employs more than 1,800 people throughout its processing plants, receiving stations and gift shops. Contract manufacturing partners are also used for some of what they produce. But the majority of what they produce is made at three plants – in Sacramento and Salida, as well as their 200,000-square-foot manufacturing and processing plant in Turlock, California. Their products are shipped to over 80 countries worldwide.

80% of the world’s almonds are grown in California, particularly the California Delta that starts just north of Los Angeles and terminates north of Sacramento. This company collects the almonds from the farms, ships them to hullers who remove the shells, then the almonds are shipped to either Salida or Sacramento for initial processing or pasteurization. Then these work-in-process products get shipped again either to the Turlock facility – for slicing, dicing, and almond milk production – or get shipped up to Sacramento for snack nuts flavoring. Once the final products are produced, they are shipped across the nation and Canada and internationally. International shipments usually get shipped by ships out of the port of Oakland.

The company has two primary business lines that together generate more than $1.5 in revenue. There is their branded business, where over 750 almond products – everything from cans of nuts to chocolate coated bags of nuts to Almond Breeze milk and creamer products – carry the Blue Diamond label. Then there is a global ingredients business. This business line sells almond ingredients – whole almonds, almond slivers, flour and protein powder – to food companies who use the ingredients to make their own products.

Both sides of the business have demanding customers. The branded business line, for example, serves some of the world’s largest retailers. These retailers demand that shipments arrive on time in full or force Blue Diamond to pay fines for the privilege of continuing to do business with them.

The COVID Challenge

Steve Birgfeld, the vice president of information technology & services at Blue Diamond, said that during COVID “the Port of Oakland became a real point of congestion. Where it used to take two to five weeks to get your container booked was now taking up to three months.”

Blue Diamond had already been on a journey to improve their supply chain capabilities. The first building block was SAP’s enterprise resource planning solution which was initially implemented in 2014, and upgraded to S/4 Hana in 2021. Next came supply chain planning (SCP). The company invested in SAP’s supply chain planning solution – Integrated Business Planning – back in 2018 to move away from a manual demand and supply planning process to something more automated and optimized.

“But COVID is what forced the urgency from the logistics side of our business,” Mr. Birgfeld explained.

Implementing SAP Integrated Business Planning

“We’ve had a whole transformation journey that we’ve mapped out, predominantly around the synchronized planning concept,” Mr. Birgfeld explained. The demand planning solution provided for more accurate, statistical forecasting. That statistical forecast then fed the constraint-based factory planning. The integrated business planning process, enabled by the SAP tool, was then used to better balance demand and supply. The branded products and ingredients businesses were not treated as silos, but instead planning synchronized production across both businesses. Once the demand/supply plan is produced, that feeds the logistics planning process.

Blue Diamond had the usual master data and change management challenges with implementing SCP. Nor has the project really ended, they continue to optimize the solution to improve the planning. The company is now in the process of incorporating demand sensing. Demand sensing improves forecasting by incorporating short-term demand signals like point of sale data.

“What IBP gave us was a single platform with consolidated data, where we could also do scenario planning,” Mr. Birgfeld continued. An analysis that took 6 hours could now be done in 20 minutes.

Scenario planning became more important during COVID. To react to the dynamic nature of the market during the pandemic, they also sped up their integrated planning process, the process that balances supply with demand. The process was collapsed from the standard one month rolling planning process to a process that was done on a weekly basis in order to better react to new challenges that were cropping up much more frequently during the pandemic.

In addition to increased agility, the use of SAP IBP enabled Blue Diamond to reduce inventory by 20%, improve on time in full shipments to customers, and reduce transportation costs by over a million dollars because of a better understanding of what the facility-to-facility shipments needed to be.

Implementing Logistics Business Network

“The TM/LBN solution was always on our roadmap,” Mr. Birgfeld continued. But when COVID dramatically slowed down the shipment transit times, that accelerated the push to get the real-time logistics solution installed. Working in close partnership with the VP of Supply Chain, we quickly mapped out what our key requirements were. For one, TM/LBN allowed the cooperative to get better visibility to what shipping times would be from alternative ports like Los Angeles or New Orleans.

They kicked off the TM/LBN project in 2022, with the initial phase being focused on ocean visibility, where they were having the greatest problems. They were live by October. The next phase involved implementing real-time domestic transportation visibility. That went live in July of this year. The solution allows Blue Diamond to have a much better understanding of drayage problems and when a ship will depart. Similarly, the domestic visibility provides a much more accurate understanding of when goods will arrive at customer and Blue Diamond sites.

The company still does see issues where what they thought would be a shipment becomes significantly longer for one reason or another. But Blue Diamond now has visibility to those issues; They can proactively notify customers of the delay and the reason for the delay. With Ocean, where there are longer lead times, customers may have an opportunity to reroute a shipment when an issue surfaces.

But not only is it possible to get better ETAs, it is much easier to access this data. Blue Diamond used to have a team of people that would go onto every carrier’s website a few times a day to gather ETA information. “That whole process got eliminated by this LBN implementation.”

The solution also gives Blue Diamond a freight cost estimate that can be accrued against. An accrued expense is an expense that is incurred in one accounting period but not paid until a future accounting period. Now, as the bills come in, the company can measure against the accruals to make sure that they are seeing accurate pricing. Finance used to have to spend days every month examining invoices and disputing shipping costs that they thought were too high. Now a process that was very manual has become both faster and more accurate.

The combination of IBP plus TM/LBN led to even further gains in on-time deliveries. IBP improved service from the low 90s to the mid-90s. The combination of the two has led to an on-time service level that is now 98- 99%.

In conclusion, Mr. Birgfeld says there have been significant productivity and cost improvements. “But it really isn’t one single component, it is the combination of demand, supply, and logistics planning. It’s the way all these pieces work together to provide flexibility, resiliency and better value for our growers and customers.”

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