Rocky Mountain Chocolate Factory is implementing a range of supply chain optimization initiatives, leading to sweet cost savings for the company known for cheesecake caramel apples, gourmet truffles, English toffee, and assorted dark mints.
Reducing inventory levels on raw materials and finished goods of underperforming chocolate products has enabled the company to eliminate multiple traditional warehouses. RMCF now relies heavily on cross-docking facilities for faster inventory throughput and more efficient out-bound loads. These factors are enormously important in streamlining online orders with efficient cold chain deliveries within 2 days.
The company achieved a 46% reduction in inventory levels year-over-year for the quarter that ended May 31, 2023.
Combined supply chain initiatives have the chocolatier on pace to exceed its total annual cost reduction goal. According to CEO Rob Sarlls, “These initiatives have combined for over $700,000 in annual cost savings, which is more than 60% of our $1.2 million annual cost saving target introduced last quarter. This is ahead of our original expectations in terms of both magnitude and timing.”
Many of Rocky Mountain Chocolate Factory’s initiatives are steeped in lean concepts, which emphasize reducing wastes (in all forms) while simplifying operations, which leads to improved positioning with competitors.
During its July 13, 2023 earnings call, CEO Sarlls shared, “We are well on our way in positioning Rocky Mountain Chocolate to gain market share in what is a highly fragmented U.S. chocolate confectionery market.”
This post is based on the Supply Chain Dive article, Chocolate maker ahead of cost savings schedule as it slashes inventory, by Max Garland, July 25, 2023, and the YouTube video in the Spotlight. Image source: mavo/Shutterstock
1. What are some considerations for operating at lower inventory levels?
Guidance: A range of possible answers exist. Here are some considerations:
Accurate inventory records must be kept (e.g. accurate cycle counting)
Any inventory item targeted for reduction (such as raw materials or packaging) will require high reliability from suppliers in terms of quality, inventory replenishment, and delivery lead-times.
High operational efficiency is required (such as best-in-class equipment uptime) to operate with lower levels of finished goods inventory.
2. What are some ideas for improved end-to-end supply chain planning with upstream (suppliers) and downstream (customers) trading partners?
Guidance: A range of answers exist. Here are a few suggestions.
Members of the supply chain would want to implement a Collaborative Planning and Forecasting Replenishment (CPFR) system between trading partners (external focus), to proactively communicate major changes affecting end-to-end supply chain operations.
Companies within the supply chain need robust Sales and Operations Planning (S&OP) processes so that internal departments (such as accounting, sales, operations, engineering, and HR) can understand and act on sales and production changes.
Implementation of a vendor-managed inventory (VMI) program with strategic suppliers to enable more efficient inventory management ownership of key ingredients (in this case, for example, it might be cocoa, sugar, and nuts).