Henkel Iberica Case Study: Solving SKU Challenges and Strategies

Henkel Iberica Case Study Module 1, Session 5 Dharti Shah

Contents Executive Summary ...................................................................................................................... 3 Issue Identification ........................................................................................................................ 4 Operating Environment ................................................................................................................. 5 Root Cause Analysis ..................................................................................................................... 6 Alternatives and Options ............................................................................................................... 7 Recommendation .......................................................................................................................... 8 Implementation ............................................................................................................................. 9 Monitor and Control .................................................................................................................... 10 Contingency Plans ...................................................................................................................... 11 References .................................................................................................................................. 12

Executive Summary Henkel Iberica is a Spanish household care division of Henkel KgaA and is a significant player in the household care industry, and is facing challenging issues related to SKU proliferation, difficulties in forecasting, overstocks, and out-of-stocks, as well as has the growing threat of emerging private companies. This case study offers an insight into the impact of the current issues, identifies potential solutions, and provide recommendations and opportunities to solve these issues. Henkel Iberica’s current organizational strategy focuses on SKU diversity, Every Day Low Prices (EDLP) strategy, and Collaborative Planning, Forecasting, and Replenishment (CPFR) Strategy to address these issues. This report concludes a thorough understanding and a recommendation to effectively implement CPFR as the promising solution to improve forecasting, planning, reduce SKU complexity and enhance supply chain of the organization.

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Issue Identification Henkel Iberica is facing several interconnected issues and challenges that have a direct impact on its market position and profitability. Following are the major issues identified. 1. SKU Proliferation The company’s current strategy of expanding SKU variety has led to complexities in product portfolio within organization and it causes difficulty in forecasting demand and managing the supply chain. 2. Competitive Pressures Private companies/brands and discounted retailers provide reduced prices due to their streamlined product offerings and limited SKUs, and this contradicts Henkel Iberica’s strategy. 3. Supply Chain Inefficiencies Henkel Iberica’s Continuous Replenishment Strategy (CRP) strategy is a traditional supply chain strategy. It has reached its limitations in handling SKU complexities.

Operating Environment Henkel Iberica operates in a well-established and highly competitive sector that deals with household care products. In this particular market, customers are highly price-conscious, who demand increased value for their money, but also emphasis on high quality of the products. However, the competition in this industry has been rapidly evolving. Private labels and discount chains are emerging as strong competitors in this industry. These labels have a smaller SKU range and they offer usually more affordable products and try to capture the market share with aggressive pricing strategies. Due to this, they pose a challenge to established brands like Henkel Iberica. Given this situation, Henkel Iberica recognizes the need of an effective supply chain strategy that can adapt to changing market trends to remain competitive in this household care industry.

Root Cause Analysis 1. SKU Proliferation – The root cause of SKU Proliferation lies in the company’s organizational strategy. Their focus was always to provide product diversity, to align with market demand for a variety of products. This has resulted in a vast and complex product portfolio. These huge variety of products that was developed to satisfy consumers, is now making it challenging to effectively forecast demand and to manage the supply chain efficiently. 2. Competitive Pressures – The competitive pressure face by Henkel Iberica is due to increase in private labels and discount chains. They fiercely compete with Henkel Iberica with their unique price-effective strategies. They have simple product offerings and products are therefore, reduced priced. Henkel Iberiaca’s strategy is hampering its growth in the market. The root cause is customer’s shift to affordable options and competitors adapting this change. 3. Supply Chain Inefficiencies – These inefficiencies are directly related to company’s Continuous Replenishment Program (CRP) strategy. This strategy is designed to manage less complex and simple product offering, where demand can be predicted. However, because of SKU Proliferation, this strategy is not suited to manage the complexities. This traditional strategy didn’t evolve with company’s growth and diversification. The is creating challenges in maintaining efficient supply chain operations. These root causes are interrelated. To address these root causes, organization may require re-evaluation of the company’s strategies, product offerings and supply chain management practices to remain competitive in this market.

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Alternatives and Options Several alternatives are available for Henkel Iberica to address these issues. 1. Implement CPFR (Collaborative Planning, Forecasting, and Replenishment) – CPFR is a strategic approach to implement modern supply chain strategy, it focuses on collaboration with various key stakeholders such as suppliers, retailers and distributors. By adopting this approach, Henkel Iberica can accurately forecast demand through insights from all these stakeholders in the supply chain. This strategy can also help in streamlining product offerings and reduce the mismatch between supply and demand. It will also benefit in adapting to market changes. It also requires strong relationships with partners to facilitate collaboration. 2. Reduce SKU Complexity – Henkel Iberica can focus on a limited set of SKUs that are consistently in high demand or have high profit margins. By reducing the SKU offerings, the company can streamline its operations and thereby, minimize the forecasting and supply chain management challenges. This approach allows the company to distribute resources efficiently. These alternative also require thorough market research to ensure accurate product selection. 3. Explore EDLP (Every Day Low Prices) Strategy – EDLP strategy can be adapted by offering consistent and reduced-price product lines. This strategy can help Henkel Iberica in minimizing pressures from private labels and discount chains. It can also simplifies pricing and promotions as product offerings are streamlined. It can also increase brand loyalty and increase in sales volumes. Henkel Iberica should carefully study the market trend, customer preferences and internal resources. The company can also consider adapting a combination of these strategies. The final decision should align with company’s long-term goals.

Recommendation Implementing Collaborative Planning, Forecasting, and Replenishment (CPFR) is considered to be the optimal strategy for Henkel Iberica. 1. Improved Forecasting Accuracy – CPFR focuses on collaboration of various stakeholders in the supply chain, including retailers and suppliers. This collaboration allows to understand market trends and demand patterns. This optimizes planning and minimize the risk of overstock or understock. 2. Reduced SKU Complexity – Henkel Iberica’s biggest challenge is SKU Proliferation. CPFR can help in solving this issue by streamlining the product offering. The company can focus on products that are in high demand in the market, this can be determined through market insights and data analysis. These helps in minimizing the obsolete inventory. This also contributes to cost savings. 3. Enhanced Supply Chain Efficiency – through collaboration within CPFR framework, all components of supply chain are aligned with market demands and changing customer preferences. With this. Henkel Iberica can better match supply with demand, reduce lead times and enhance the distribution process. These improvements help the organization in cost-savings. 4. Market Responsiveness – CPFR helps organization to collaborate closely with partners which helps the organization in adapting to the changing market trends. This increases growth and profitability for all partners.

Implementation 1. Establish CPFR process with key stakeholders – collaboration is important with distributors and suppliers for the success of CPFR strategy. This includes sharing of date, insights and strategies among partners. This will benefit the whole supply chain. 2. Employee education and training – conduct extensive training for employees and partners regarding CPFR practices. This is to ensure that there is a common understanding and objectives are aligned. 3. Performance Evaluation Metrics – Implement performance metrics and key performance indicators (KPIs) to evaluate efficiency of CPFR strategy. It should emphasize on accuracy of forecasting, reduction of SKUs and supply chain effectiveness.

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Monitor and Control It is important to establish a metrics for ongoing evaluation and analysis of key performance indicators (KPIs), to ensure the implementation of CPFR. These KPIs should be in accordance with the goals of improving demand forecasting accuracy, simplifying SKU complexity and diversity and enhance the supply chain efficiency. Tools should be used to check and indicate how closely demand aligns with the forecast. On the other hand, a vast number of product variations in terms of large number of SKUs leads to high strain on supply chain and increased operational costs. The KPI should indicate total number of SKUs, turnover of obsolete SKUs and the cost associated with managing such high SKU count. The regular review of these KPIs provide real-time insights into the impact of CPFR on organizations supply chain. Besides this, it also helps in aligning back to the goal by intervening if KPIs deviate from desired targets.

Contingency Plans In the event when CPFR encounters significant implementation challenges, it will be viable to consider gradual reduce of SKUs, thereby reducing SKU complexity and exploring EDLP strategies to address the issue. In conclusion, Henkel Iberica faces challenges related to SKU proliferation, competitive pressures in a changing economic environment with changing customer preferences. CPFR can offer a solution to these issues by aligning with market trends. This change of implementing a new policy will improve supply chain efficiency.

References Martinez-Jerez, F., Narayanan, V. (2005) ‘Henkel Iberica (A)’ [Case Study], Harvard Business School.

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Theoretical Concepts Every Day Low Prices (EDLP) Strategy: EDLP is a pricing strategy where products are offered at consistently low prices, as opposed to frequent discounts or promotions. The benefit of EDLP is that it can attract price sensitive consumers and reduce the complexity of managing many promotions. However, it may have an impact on profit margins and require a shift in customer perception from seeking discounts to valuing consistent low prices. Costs and Benefits – Costs – it reduces the profit margins and requires investment in marketing to communicate this change. Benefits – it can attract price-sensitive consumers and reduce the need of frequent promotions.

Henkel Iberica Case Study - Dharti Shah

Related Documents