Financial visibility and strong planning capabilities drive success in a complex marketplace.
Barrette Outdoor Living is one of the largest manufacturers of fencing, railing, and outdoor living products in North America. The company was purchased by a collection of private equity firms, creating a need for independent processes and systems that supported their new business model. They chose to invest in an xP&A solution that would provide easy collaboration amongst multiple departments to refine forecasting and profitability analysis in an ever-changing environment.
Barrette Outdoor Living was experiencing tremendous growth, both through acquisition and organic. With thousands of products across multiple brands, product categories, and customers, it was important to analyze and understand the revenue, cost and margins in real-time. Barrette Outdoor Living also faced several COVID-19 & market induced challenges: rapidly changing materials costs, shipping costs, labor costs, and a fluid supply chain environment. The finance team needed the ability to communicate with sales teams, plant managers, HR, and logistics to make informed decisions on pricing, production schedules, staffing, and freight planning. A deeper level of forecasting and planning detail was required as they further developed their corporate structure, to provide investors with a confidence in their ability to execute.
- Barrette invested in an xP&A environment that allowed sales leaders, plant managers, HR, and logistics to contribute in a timely and meaningful way to the company’s financial plan and budgeting process.
- Barrette’s Workday Adaptive planning solution allowed the company to optimize profitability by allowing it to dynamically plan and react to rapid changes in materials costs flowing through a fluid supply chain environment.
- Although having a mature ERP solution, Barrette’s investment in an xP&A environment further showcases their vision for planning which provides confidence in the company’s ability to execute.
Barrette Outdoor Living needed a clear picture of the true cost to make a product in order to have a strong baseline measure. Their new Workday Adaptive solution allowed for Revenue Planning by SKU. The solution also provided the ability to allocate variances to cost intelligently by each product family and distribution channel. This enabled pricing analysis which helped get to an accurate per SKU gross margin. The FP&A team could now run new pricing models and input new factors into the model based on demand, inflation, market changes, and manufacturing models with great agility. The new xP&A solution allows them to import bill of materials per SKU as a reference table for planning. Whenever there is a purchase price variance (material cost more than what was planned), they could allocate the increase back out to a material class for more precise planning. When they see trends in materials costs, they can predict likely changes in standard costs that will change profitability. This allows them to adjust price or other variables with agility. An accurate, detailed predictive model was now in place with the ability for greater gross margin analysis.
Next, they incorporated corporate allocations, transportation and logistics planning, as well as overall cost center management and headcount planning to get a more granular perspective for accuracy in the overall budget & forecasting process. Transportation Management & Logistics planning allowed Barrette to determine the freight cost per truck based on changes in wages and overhead costs for specifically the trucking of goods on their maintained fleet of trucks. They use a driver-based model to get to a total freight cost. Specific variables are tracked in detail such as planning by full or partial truck load, driver wages, or estimated (erratic) fuel costs. Cost Center management with Headcount Planning provided the Finance team the ability to track costs across their ~200 cost centers with headcount being the primary driver. Looking at the cost by plant by shift, they determine their direct labor costs, then match it to their forecast and demand. All labor costs can be allocated to specific product groups then to SKUs. These costs are rolled back to their cost of goods sold to provide for greater visibility to their gross margin.
Collaboration of different departments and teams provided visibility into all the above areas. This granular visibility positively impacted Barrette Outdoor Living’s Income Statement accuracy. By having this, they can now derive a statement of cash flow and balance sheet that can be planned line by line. Macrospect was able to create a solution tailored to a complex distribution channel, rapidly changing materials cost, and volatile supply chain market. This deployment of Workday Adaptive Planning provided Barrette with financial visibility and strong planning capabilities for a complex marketplace.
- Gross Margin
- The ability to look at the gross margin based on changes of shipping costs, promotions, or prices of different customers in their different regions. This allowed them to evaluate more profitable opportunities.
- Revenue Planning by SKU (Dollarization)
- Solution gave accurate predictive modeling.
- Accurate revenue forecasting that factored in relevant market conditions.
- Ability to look at gross margin by class or level based on the changes in shipping costs, promotions, prices of different customers or different regions.
- They can evaluate more profitable opportunities, adjust to market conditions, and hold teams accountable to forecasts helping bridge the changes.
- Allocation of Variances
- Imported bill of materials by SKU provides a reference table for planning with breakout into 16 different cost components.
- When there is a purchase price variance (material cost more than what was planned), they can allocate the increase back out to material class for more precise planning.
- When they see trends in materials costs, they can predict changes in standard costs that will change profitability and adjust their pricing or other variables.
- Transportation Management & Logistics Planning
- Determine the freight cost per truck based on changes of wages and overhead costs specifically for the trucking of goods.
- Could use a driver-based model to get to a total freight cost.
- Several specific variables could be tracked in detail, e.g., plan by full and partial truck load, include driver wage, estimated fuel costs.
- Headcount Planning and Shared Cost by Plant
- Looking at the cost by plant, they can look at costs by shift, determine their labor and match it to their forecast and demand.
- All labor costs could be compared to plan & forecast to identify drivers of change in gross margin and fixed SG&A.
- Labor cost is combined with materials cost to determine standard costs by SKU.
- Continuous Evolving Solution
- Initial phase tackled complex a dollarization process saving countless hours refreshing and updating prior models prone to error.
- As team enters first full budgeting cycle, they are adding on capability and further integrating the use of the solution.
- Company was recently acquired by a larger peer with mindset that both companies are ‘Better Together’. Looking at capabilities they see an xP&A solution as a strength for Barrette Outdoor Living.
- Company is investigating further buildout into inventory & production planning capabilities.