Henkel Ibérica

Presented by Group 5:• Darshan Singh S-

17 • Hitesh Arora S-26• Sachin Sharma S-

51 • Sanjeev Vyas S-

54• 6th October 2010

Context of the Case

• 2002: Henkel operating in a highly competitive laundry detergent space in Spain & Portugal

• Immense pressure from private labels who retail at 50% of Henkel’s price

• Brands resorting to special promotions & product variants to create brand differentiation

• Growth in SKU’s & product offerings became more complex leading to a strain on the infrastructure of both manufacturers & retailers

• Manufacturers & retailers finding difficulty in developing accurate sales forecast & demand planning system

• Leading to higher levels of obsolete and out-of-stock items

Problems

• Lack of viable long range forecasts increasing the production costs as well as increasing over or under-stocks

• Highly complex portfolio putting strain on the sales, production and distribution systems

• Rising competition from discount chains & private labels

Alternatives

1. Cut back or abandon special promotions

2. Introduce CPFR (Collaborative Planning Forecasting and Replenishment)

3. Reduce product complexity and competing with everyday low prices (EDLP)

Alternative 1: Cut back or abandon special promotions

• Pros:• Less strain on infrastructure of both

manufacturers & retailers• Reduced complexity of product offerings• Less confusion and better inventory

management

• Cons:• Difficult to compete without special promotions• Will lead to decreasing sales • Lack of new products could stagnate growth

Alternative 2:

Introduce CPFR

Pros:• Benefits of CPFR attractive• More accurate forecasts through continuous

collaboration • Streamlining of inventory management and will

help in forecasting promotional items• Considerable reductions in obsolete items, out of

stocks, inventory levels, and production costs

Alternative 2:

Introduce CPFR

Cons: • Relatively new tool and still in the formative

stages of development• No global standard for CPFR• Each company uses different software systems

for recording, processing and transmitting data• Difficult to change a company’s processes,

cultures, and relationships

Alternative 3:

Reduce product complexity & competing with EDLP

Pros:• More manageable • Reduced complexity leading to more

efficiencies in production, retail and sales• Lower tussles between manufacturing and

marketingCons:• Difficult to create brand differentiation and

preference in the market• Direct competition from other brands and

private labels

Recommendations

• Trim down the product variations and special promotions

• Reduce dependence on Sales Promotions and invest in building brands in the medium to long term

• Implement CPFR and continuously improve with each iteration

• Invest in the future with CPFR while managing with lower number of SKUs for the present

Thank You!