House Foods China Inc.
Customer Profile
- Company Name
- House Foods China Inc.
- Location
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Tokyo office: 6-3 Kioi-cho, Chiyoda-ku, Tokyo 102-8560
Osaka office: 1-5-7 Mikuriyasakaemachi, Osaka-shi, Osaka-fu 577-8520
- Established
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November 11 1913
- Capital
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2 billion yen (as of March 31, 2016)
- Business Activities
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Business operations comprise the manufacturing and processing of food products including aromatic and spiced foods, processed foods , precooked foods and home desserts.
Note: Company names, departmental affiliations and position titles are current as of the interview date.
The project includes the construction of SCM infrastructure using the ABeam Cloud and Supply/Demand Template for House Foods China Inc., the affiliate in China of House Foods Group Corp. This will make sales operations highly accurate and easy to understand.
Story
Overview
Expand business operations in China to make curry rice a national food.
Implement an SCM infrastructure BPR project for business process standardization and visibility.
House Foods China Inc., the affiliate in China of House Foods Group, handles food product manufacturing and sales, as well as restaurant operations. As a result of concentrated efforts to popularize curry roux and retort package products, Japanese-style curry is steadily establishing a widespread presence in Chinese households on its way to becoming a national food. Sales have grown continually at an annual rate of over 20%.
Due to the sudden drastic expansion of sales and distribution operations, however, building up system infrastructure that achieves standardization and visibility has become an urgent task. ABeam Consulting used its Supply/Demand Template and ABeam Cloud to support the SCM infrastructure BPR project initiated under these circumstances.
Business processes lacking essential data—the urgent issue that triggered the establishment of SCM infrastructure
Nakano : We are extremely grateful to House Foods for choosing ABeam Cloud for their SCM Mission-Critical Business Reform Project at their Chinese base. It was an incredibly challenging project—we established systems for both results-based and planning-based SCM mission-critical business processes at the same time, in a period of just four months between November 2015 and March 2016. At ABeam Consulting, we are very relieved that the business processes started operating as scheduled under these new structures.
Nakashima : House Foods is also extremely grateful. Thank you.
Katsurayama :Half a year has now passed since the new SCM infrastructure commenced operations, and today we would like to take a look back over the entire project. To begin with, can you explain why you needed a new SCM infrastructure? What issues were you facing?
Nakashima : Having established a business goal of making curry a Chinese national dish, House Foods began producing curry roux in China in 2005. We took great care to create a flavor suited to local tastes—we used star anise, for example, which is used by our Chinese customers as a spice and as an ingredient in traditional Chinese medicine. As a result, although we were by no means completely satisfied, curry steadily began to penetrate into the Chinese market.
At that time, we only had one plant in Shanghai. However, almost exactly at the same time as I was posted to China, in October 2013, a new plant was established in Dalian, and our production base expanded.
Nakano : It sounds like global business expansion was going well.
Nakashima : Yes, it seems that way. However, when I was first posted here, it was a catalog of nightmares. The reason was that the data that should have been essential to business processes such as production, sales, inventory, and distribution was almost completely lacking. Even though we had gone to the trouble of establishing a second plant at our Dalian base, we were faced with the problem of not being able to deliver products to our customers efficiently.
Nakano : Can you explain the problems you encountered in concrete terms?
Nakashima : China is a vast country, so it goes without saying that, from the standpoint of both distribution and sales channels, it is more efficient to sell products made in the north (in Dalian) in the north, and products made in the south (in Shanghai) in the south. In reality, however, we did not have full control over sales and inventory data, so it frequently happened that products made in the north were sold in the south, and products made in the south were sold in the north—an incredibly inefficient operation.
There were also problems with our pricing strategy. At House Foods, we adjust our pricing according to the region and the business partners involved. However, it often happened that products were sold in certain regions at prices which they should never have been sold at under normal circumstances.
Nakano : That is a major issue. It could have threatened the market position that House Foods worked so hard to establish in China.
Nakashima : Yes, you’re quite right. In addition, we weren’t able to trace the sources of these irregular products or the routes they took.
Katsurayama : Having said that, you did actually have a system that oversaw mission-critical business processes such as sales and distribution, didn’t you?
Nakashima : Of course. After all, business processes cannot be put into effect through paper correspondence and verbal commands alone. But although we had a system of sorts, it was separate between each base. For example, we have sales bases in both Beijing and Shanghai, but a different system was implemented for each base, and there was no data sharing between them. The personnel in charge of sales used tools such as Excel and managed sales data in their own individual ways.
We wanted to escape this state of affairs, establish a system that used integrated master data, and manage and control this data using rules that were standardized throughout the company.
Katsurayama : And it was this pain which triggered the establishment of the new SCM infrastructure.
Nakashima : Yes.
Project Background and Objectives
With 20% annual sales growth as the goal, sales operations continue to expand, change and diversify drastically.
Operational standardization and visibility, as well as systems infrastructure establishment are urgent tasks.
Increased sales forecast accuracy is also needed in order to prevent loss of sales opportunities and control rising costs of excess inventory.
Project Outline
Outline: The project includes the construction of SCM infrastructure using the ABeam Cloud and Supply/Demand Template for House Foods China Inc., the affiliate in China of House Foods Group Corp. This will make sales operations highly accurate and easy to understand.
Software: SAP
Story
Why ABeam
House Foods placed absolute faith in ABeam Consulting, and each party understood the other’s approach.
Katsurayama : For this SCM Mission-Critical Business Reform Project, you chose ABeam Consulting to be the Real Partner that would work together with you to solve various problems. Why did you choose ABeam Consulting?
Nakashima : As Mr. Nakano mentioned earlier, we wanted to establish a system that combines improvements to both results-based and planning-based mission-critical business processes at the same time. We stated this desire at the request-for-proposal (RFP) stage. Put simply, ABeam Consulting submitted a proposal that carefully satisfied both these conditions. Although we received proposals from a number of other companies, their proposals were heavily biased toward either the results-based business processes or the planning-based business processes. In contrast, the content of ABeam Consulting’s proposal was extremely well balanced.
Nakano : Both Katsurayama and I are very grateful that House Foods chose to collaborate with us on those projects as well.
Nakashima : We are grateful, too—you helped us in many, many ways. Thinking about it now, our two companies have worked together for a considerable amount of time. For this SCM Mission-Critical Business Reform Project, we were reassured by the fact that each party understood the other’s approach very well. Whenever we work with a new vendor, it is difficult not to feel a sense of anxiety. This is true even in Japan, and doubly so in China.
In this sense, it was significant that we shared a trusting relationship. It was extremely reassuring to know that ABeam Consulting fully understood House Foods’ business and philosophy. This time we were particularly keen to complete this project in as short a timeframe as possible, so we came to the conclusion that there could be no better partner than ABeam Consulting.
Nakano : Thank you. After transferring to Abeam China, both Katsurayama and I were grateful to have the opportunity to work with you and House Foods once again. There were a number of chance factors behind our reunion, but it makes me feel extremely honored to think that these factors were only made possible due to the trust established by past successes.
Story
Challenge
Project Master Schedule
Major Issues
- With sales proceeds growing at over 20% per year, sales operations continue to expand and diversify drastically and rapidly.
- Establishing standardization, visibility and systems infrastructure has become an urgent task.
- Increased sales forecasting accuracy is needed in order to prevent loss of sales opportunities and control rising costs of excess inventory.
- IT personnel are scarce in China, making it necessary to control IT investment costs.
House Foods placed absolute faith in ABeam Consulting, and each party understood the other’s approach.
Katsurayama : For this SCM Mission-Critical Business Reform Project, you chose ABeam Consulting to be the Real Partner that would work together with you to solve various problems. Why did you choose ABeam Consulting?
Nakashima : As Mr. Nakano mentioned earlier, we wanted to establish a system that combines improvements to both results-based and planning-based mission-critical business processes at the same time. We stated this desire at the request-for-proposal (RFP) stage. Put simply, ABeam Consulting submitted a proposal that carefully satisfied both these conditions. Although we received proposals from a number of other companies, their proposals were heavily biased toward either the results-based business processes or the planning-based business processes. In contrast, the content of ABeam Consulting’s proposal was extremely well balanced.
Nakano : Both Katsurayama and I are very grateful that House Foods chose to collaborate with us on those projects as well.
Nakashima : We are grateful, too—you helped us in many, many ways. Thinking about it now, our two companies have worked together for a considerable amount of time. For this SCM Mission-Critical Business Reform Project, we were reassured by the fact that each party understood the other’s approach very well. Whenever we work with a new vendor, it is difficult not to feel a sense of anxiety. This is true even in Japan, and doubly so in China.
In this sense, it was significant that we shared a trusting relationship. It was extremely reassuring to know that ABeam Consulting fully understood House Foods’ business and philosophy. This time we were particularly keen to complete this project in as short a timeframe as possible, so we came to the conclusion that there could be no better partner than ABeam Consulting.
Nakano : Thank you. After transferring to Abeam China, both Katsurayama and I were grateful to have the opportunity to work with you and House Foods once again. There were a number of chance factors behind our reunion, but it makes me feel extremely honored to think that these factors were only made possible due to the trust established by past successes.
Project Master Schedule
This was a challenging infrastructure systems implementation project for the SCM field, partly because of the four-month schedule from business process and system design to development testing.
Nakashima : To be honest, when I was first transferred to China, I swore to myself that I would never work on establishing new systems again! Although I gained valuable experience on the earlier SAP implementation project, it was extremely tough. Part of it is that my real job is finance, and so I occasionally feel that systems aren’t my line of work.
Katsurayama : Still, you felt a duty to take the lead yourself.
Nakashima : I think people who have been transferred to overseas bases with the aim of securing new markets will understand. The fact is, the infrastructures are not as complete as they are in Japan, and one person has to take on a number of different roles.
Katsurayama : What other roles are you fulfilling at the moment, Mr. Nakajima?
Nakashima : My official title is General Manager of Management Headquarters. However, I also work on finance, human affairs, general affairs, legal affairs, and systems. Of course, this is one of the real pleasures of working for a global business, and it also gives me great job satisfaction. Having said that, so many problems arise in every possible place—it is too much for one person to handle. On such occasions, I am extremely grateful to have a partner with whom I can consult about anything. ABeam Consulting is exactly that.
Story
Solution
Solutions
- Supply-and-demand Template
- ABeam Cloud
Implementing new systems in the workplace, beginning with results-based business processes
Katsurayama : Thank you, Mr. Nakajima, for your kind words. If you don’t mind, I hope we can change tack slightly and discuss the solutions provided by ABeam Consulting. In order to establish the new SCM infrastructure as quickly as possible, we proposed the use of ABeam Cloud, which you put to use.
Katsurayama : Another significant factor regarding this SCM Mission-Critical Business Reform Project was that at ABeam Consulting we adhered to two basic principles. First, we established a system for planning-based business processes in a short timeframe by using supply-and-demand templates from ABeam Cloud. Secondly, with regard to results-based business processes, we also used supply-and-demand templates to carry out additional system development, standardize operations and bring visibility to business processes. We would be extremely grateful for any feedback you might have.
Katsurayama : Another significant factor regarding this SCM Mission-Critical Business Reform Project was that at ABeam Consulting we adhered to two basic principles. First, we established a system for planning-based business processes in a short timeframe by using supply-and-demand templates from ABeam Cloud. Secondly, with regard to results-based business processes, we also used supply-and-demand templates to carry out additional system development, standardize operations and bring visibility to business processes. We would be extremely grateful for any feedback you might have.
Nakano : I might add that our supply-and-demand templates are an accumulation of the knowhow we have cultivated at ABeam Consulting by supporting supply-and-demand reforms at a large number of companies. This means we are able to resolve many issues in a short timeframe. Some examples of these are the standardization and economization of disparate supply-and-demand business processes; the switch from monthly to weekly planning; the creation of highly accurate shipment plans; the automatic interlinking of various plans, and their connection to production plans; automatic generation of center supply plans on a daily basis; bringing visibility to production materials data in associated departments; the forecasting of future congestion probabilities; making KPIs visible, and the rapid implementation of PDCA cycles; and the monitoring of proactive inventory management. Our supply-and-demand templates also include an abundance of best practices from the food industry. We wanted to contribute as much as we possibly could to House Foods’ business.
Expected Achievements of the ABeam Supply-and-demand Template for This Project
Nakashima : It goes without saying that at House Foods, we are extremely grateful for ABeam Consulting’s kind suggestions. But to be honest, it will take a little while longer before we can see results in our planning-based business processes. House Foods’ Chinese business continues to enjoy a period of rapid growth, and so we have not yet grasped just how applicable past experiences will be to the future.
For example, when I was first transferred to China, there were only about 40 sales representatives; now there are more than twice as many. This alone has a massive impact on our sales strength. No matter what campaigns we implement, they result in significant changes in our monthly sales. When it comes to inventory forecasting, too, we are at a stage where we don’t yet have sufficient data. Consequently, we intend to focus our activities in anticipation of what will happen in two or three years’ time.
For this reason, we are currently concentrating on our results-based business processes. We want to develop the ability to grasp accurately, and at any given time, what stock we have where, when its sell-by-date is, and where it was produced. We also want to be able to precisely trace where these products are shipped. In addition, we intend to take control of the fundamental task of optimizing our internal business processes, up to and including the invoicing stage.
Story
Result
Key Achievements
- Systematization of business process operation
- Unification of sales & inventory data
- Establishment of supply-and-demand adjustment work at alert starting point
- Unified management of master data for better data accuracy
Leading members of each division assembled and began discussing ways to improve business processes
Post-implementation Overall Sales SCM System
Katsurayama : So, you first prioritized improvements to your results-based business processes. It has only been a few months since the system started operating, but have you started to see results?
Nakashima : For the first few months after system operations commenced, we encountered a number of problems such as network failures or unfamiliarity with operational procedures.
However, after the third month or so, the network and operations started to stabilize and, as a result, our employees now regard the system very highly. I received an email from a Chinese employee in charge of the orders business who wrote: “The new SCM system is incredible! Sending and receiving data between the Shanghai and Beijing offices is now extremely smooth.” I also received a message from a local employee in charge of inventory management and classification at our warehouses. He said: “I am now able to complete my work quickly. Compared to when I was managing inventory using Excel or handwritten forms, now the data I input is immediately registered on the SCM system, and a report is automatically produced. I can also check which products we have had queries about straight away. It is extremely convenient.”
When you think about it, all of these things are common practices. However, it makes me very happy to receive these comments from the actual workplaces involved. I said this earlier as well, but the optimization of internal business processes was a major goal of the SCM Mission-Critical Business Reform Project. In this respect, I believe that we are slowly but surely beginning to see results.
Nakano : The troubles you encountered at the start were partly caused by insufficient support on our part, and we regret this very much. It makes me glad to hear the system is starting to take root in your workplaces. Now that the business processes have been improved, are there any ways in which your employees have undergone a change of awareness?
Nakashima : Yes, undoubtedly. In addition to being able to complete tasks in a shorter timeframe, the leading members of each division have also started to gather together of their own accord. Until recently, employees had little interest in jobs that they weren’t in charge of, so this is a dramatic change. These members now also discuss how they can work together more smoothly, and how they can reduce the time required for business flows. Teamwork has improved significantly.
In the end, people cannot generate ideas in a vacuum. Thanks to the SCM system, individual employees can see for the first time the significance that their own work has in the business processes of the entire company. This has been a catalyst for increased awareness on a variety of matters.
Going forward, our priority will be training the people who operate the system
Katsurayama : This might be a slightly premature question, but how do you intend to develop the SCM system in the future based on these results?
Nakashima : For a food manufacturer like House Foods, sales and distribution are key, even among the many systems we operate. In fact, we are hoping to start construction on a new plant in Zhejiang in addition to our current Shanghai and Dalian plants. If this happens, it will become increasingly important to decide how to optimize production allocations, routes, and distribution among these three plants. Viewed in this light, I have no doubt that our having acted preemptively to establish an SCM system will benefit us greatly. Going forward, we not only want to improve our planning-based business processes, which is the other core component of the SCM system I discussed earlier, but we also intend to enhance the accuracy of our inventory and demand forecasting.
However, the system is just a system—nothing more and nothing less—and people are required to make it work. People are also the source from which data is generated. It follows that one of the major issues we face going forward is how to train these people, and how they will interact with the system.
Improving Sales Forecast Accuracy : Ststem Supply-and-demand Forecasting Logic
Since past performance includes broad sales promotion plan data, in order to forecast demand accurately, sales plan data will have to be separated from past performance data (outlier analysis). Also, immediate past up/down trends and cyclical seasonal periods will also have to be accounted for in calculating forecasts.
Nakano : As systems store more and more information and data, it will become possible for companies to conduct their own analyses and predictions. However, in order to effectively use this in their businesses, companies will be required to establish a fundamental hypothesis and test approach. Going forward, it will be important to nurture personnel who possess the sensitivity to do this.
Nakashima : Yes, that’s right. So far, growth has been driving an increase in sales, so the opinions of our sales division were accepted almost without fail. If we end up with a shortage of products as a result of reducing production volumes, then the sales division will be furious. Because of this, we currently tend toward ensuring that we have a margin for error in both production and inventory. In recent years, however, even the Chinese economy has been showing signs of a slowdown, and there is no guarantee that our products will continue to sell as well as they have in the past. We must view the figures provided by the sales division with a scientific and objective eye, and keep firm control over production, inventory, and distribution. The SCM system will provide the foundation for this, and we will have to discover the optimal way to use it. We hope to receive even more generous support from ABeam Consulting in the future.
Nakano : Of course. We will do our utmost to meet your expectations.