Case Henkel Ibérica (A)

The case tells about the big conglomerate Henkel KgaA and its challenges in highly competed business area, the fast moving consumer goods (FMCG). Henkel Spain, the Spanish subsidiary of the German company Henkel KgaA, has noticed that the skyrocketing level of sales promotions and the complexity of the laundry detergent portfolio have seriously taxed their sales, production, and distibution systems. Stock keeping units (SKU) have almost tripled in five years because of new product launches, brand variations, and special product packaging.

Now Esteban Garriga, customer service director at Henkel Iberica, is questioning whether Collaborative Planning, Forecasting, and Replenishment (CPFR) would help manage retail promotions and limit their impact on the stock-outs and obsolete inventory. Many in the organization also believe that the company should abandon or cut back promotions and adopt an everyday low pricing strategy.

Henkel uses special promotions, instead of straight price promotions, such as more product for the same price, specially bundled products, and coupons or free items attached to the package. These promotions are retailer-specific, therefore there is a need for a wide variations of different kind of packagings. The product offerings have become more complex and Henkel and retailers find it more difficult to develop an accurate sales forecast and demand planning systems, which lead to higher levels of obsolete and out-of stock items.

José Navarro, Sales Director of Henkel Spain, mentions that the cost of complex portfolio has increased during last years. For example, changing a bar code provokes more and more problems in the supply chain. Therefore, Henkel should concentrate more in its current products, promote the existing good quality products and simplify the variation of products. Concentrating on promotional acts