Case Study

McCormick Uses LLamasoft Modeling Technology to Rapidly Answer What-If Supply Chain Questions

Download PDF

MCCORMICK & CO.

The Bottom Line

McCormick & Co. deployed Llamasoft to support its regular performance evaluation of its global supply chain network and to assist the company in evaluating the financial consequences of acquisition opportunities. Nucleus found that Llamasoft’s supply chain network application provided the company with a tool to find costs savings as well as to minimize capital outlays.

  • Increased supply chain analyst productivity
  • Avoided costs associated with unworkable acquisitions
  • Accelerated run-time for modeling scenarios for faster decisions
  • Supported McCormick’s overall business growth strategy

The Company

McCormick has been using supply chain design software for nearly a decade. The spice and flavorings producer had used a competitor’s offering for that purpose, prior to switching to Llamasoft’s application, which was viewed as offering a simpler data loading experience. Supply chain design software allows the company to assess the operational and financial impact of changes to its network of plants and distribution centers (DCs) before making any dollar investment. “In the old days executives would make a gut call based on past experience,” said Sterling W. Barnard, senior director of global supply chain solutions. “Now we can arm an executive with custom, detailed information to make better educated decisions.”

The Strategy

Before incurring the expense for a second software license to support growing use of the design tool for more frequent supply chain analysis, McCormick decided to evaluate other offerings available in the software marketplace. After a review of supply chain design software the company chose Llamasoft in 2010. It selected that vendor’s tool because that software was easier to use, provided more help in diagnosing problems, had faster run times, and generated more types of report output. In addition, Llamasoft was aggressively pursuing new businesses such that McCormick was able to secure a competitive price for a perpetual license with a maintenance agreement.

Since McCormick purchased the application prior to Llamasoft’s introduction of a cloudbased solution, the Maryland-based company installed the software on a Lenovo Thinkpad laptop computer running a Windows 7 operating system. Depending on the size of the model, Sterling said that generally it takes between 20 seconds and five minutes for the Llamasoft application to run the model and propose an answer. After the Llamasoft application performs its calculations, McCormick puts the results into Tableau software to provide a visualization of the data.

Key Benefit Areas

By implementing Llamasoft, McCormick realized benefits associated with easier data collection and faster run times, thus permitting its team of supply chain analysts to more quickly complete a project evaluation. One key reason for a more expeditious analysis is that Llamasoft makes it easier to load data. That’s because the Llamasoft application requires only a few screens for entry of necessary data to run the model. The requisite data can come either from an Excel spreadsheet or a Microsoft Access database. A software user downloads a template, fills in the data, and then uploads the information back into the application.

McCormick can now in a few days build a baseline model of the supply chain network that shows the locations of McCormick plants and DCs as well as key suppliers and customers. The baseline model also takes into account the bill of material for all products, and demand by stock keeping unit (SKU) for the customer. The user of the tool can then propose changes – say a new DC location – and the application examines the impact on supply chain flow and costs.

The model can assess the impact of any network change on freight shipping flows and costs. Because McCormick runs a global supply chain with customers and suppliers around the world, the company has to input data on freight estimates for moving goods by ocean, rail and motor carriers on numerous shipping lanes. For its calculations the Llamasoft tool uses average shipment sizes and numbers for transportation charges from last year’s expense report or this year’s budget.

“Llamasoft was easier to use. It provided more help in diagnosing problems, ran faster, and generated a variety of outputs.”
Sterling W. Barnard, senior director, global supply chain solutions, McCormick & Co.

Best Practices

McCormick’s success with Llamasoft is associated with the ease of software use that permits regular and quicker evaluations of its supply chain network. Frequent network assessment ensures that McCormick’s supply chain is properly designed for business continuity. The company uses the tool to weigh the financial impact of major capital investments in new plants or DCs, as well as to determine the ideal location for those facilities. Because Llamasoft application easily accepts new data inputs, it makes it easier for McCormick to examine the cost implications for “what-if” scenarios. Not only can the tool assess cost savings, it can assist with minimizing an outlay of capital by determining whether a plant may need additional equipment to maintain or boost product supply for customers.

“It’s no longer a specialty tool where we look at a particular project. It’s now a routine tool for modeling.”
Sterling W. Barnard, senior director, global supply chain solutions, McCormick & Co.

Moreover, because McCormick has also been active in the area of acquisitions to grow its business, the Maryland-based company can use the software to assess the impact of combining another company’s supply chain with its own. For that type of analysis, McCormick’s supply chain solution team must collect and input data on the other’s company’s supply chain configuration into the Llamasoft program to undertake the assessment. In regards to acquisition analysis, Barnard noted that the Llamasoft results can provide a view of how the new business would integrate with McCormick’s existing network, thus allowing the company’s acquisition team to provide a more accurate financial assessment.

Conclusion

Supply chain design analysis is a critical component of business operations as it allows a company to ensure that the makeup of the supply chain supports the organization’s overall growth strategy. In a volatile global economy, companies have been at the mercy of changing market conditions.

Supply chain design software lets a company be “proactive” by assessing financial implications prior to making costly changes or bearing increased investments in facilities and equipment. Applications that quickly model what-if supply chain scenarios give executives the ability to foresee financial consequences and make informed decisions.

Request a Demo