Terry Winnington, University of the West of England, UK, terry.winnington@uwe.ac.uk

Paul Head, University of the West of England, UK, paul.head@uwe.ac.uk

Gordon Smith, University of the West of England, UK, gordon.smith@uwe.ac.uk

The underlying aim of this paper is to investigate the implications of Stock Congestion on the performance of wholesale/retail supply chains. Congestion is an excessive accumulation of stock at different points in the supply chain. Accumulated stock slowly clogs the whole supply system and reduces new sales opportunities and efficiency of the business. This paper aims to explore the implications of applying a pull approach as used in Lean Engineering to address congestion and related stock procurement problems of the wholesale/retail sector. It will also discuss and highlight the margin and capital losses which are normally abandoned under gross one shot profit calculations by organisations. The investigation conducted by the authors shows how transition from push to pull can reduce Stock Congestion and improve the performance and efficiency of the total supply chain.

Perdigão, is one of the world greatest food companies dedicated to raising, producing and slaughtering poultry and pork as well as producing frozen pastas, soybeans and their derivates. The company reached annual gross sales of around US$ 3 billion in 2006 with more than 35,000 employees.
Its value chain structure is based on fulfilling 60,000 Brazilian customers as well as 100 countries divided into 7 regions around the world. In order to achieve this global position, a brand named Perdix has been created. Nowadays the company works with more then 2500 SKU’s, and the distribution network in Brazil consists of 24 distribution centers and 35 cross-docking transit points and for the external market 2 harbors are used as well as a specific distribution center for the European Market. To supply this distribution network Perdigão uses 20 industrial units and more than 7,000 outsourced farmers around Brazil.
This complex value chain until the year of 2003 was a traditional supply-driven chain, presenting important opportunities in terms of balancing inventory, reducing shelf-life problems, logistics costs and a better revenue management by a better customer segmentation. But the most decisive point to propose a new and innovative way to run and drive its value chain was a strategic value proposition to achieve a best-in-class customer service level.
Therefore a 3-year transformation strategy has been proposed and implemented, aiming to change its traditional supply-driven into a demand-driven value chain. This strategy has been divided into 4 phases: visibility (map the gaps and opportunities and propose a transformation roadmap), coordination (changing processes, business rules and mindset), optimization (changing and main ERP configurations and intensive use of three modules of an Advanced Planning tool system) and value capture (implementation of a continuous improvement process as well as benefits measurement structure).
This transformation process reached its propositions. In the second semester of 2006 an independent survey has been used to measure the results in terms of customer perceptions and Perdigão reached the best-in-class position in all logistics and supply chain attributes. Other important results can be pointed out: sales increase with less inventory, higher utilization of the distribution and production assets, reduction in losses because of shelf-life problems and so on. In terms of the company competence to run its supply chain and to continue the evolution in the future a complete organization structure with S&OP, logistics planning, demand planning and order management has been set up, by both an aggressive internal qualification and a high skill talents hiring programs.
This case describes the transformation strategy and process highlighting its most important innovations: the proposition to change a traditional supply-driven into a demand-driven value chain; the transformation methodology to all needed changes, the comprehensive use of Supply and Demand Management concepts as well as one of the most complete uses of an Advanced Planning tool system