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Part 2: The supply chain as an enabler of profit and growth

supply chain

Executive Summary
Research company Gartner releases an annual report entitled “The Gartner Supply Chain Top 25”. This report, based on equal weightings of public financials and peer opinion, not only ranks top 25 global supply chain giants, but offers insights into what some of these leading supply chain companies are doing that makes their supply chains so competitive.

We recently published Part 1 of this article where we discussed some of the groundbreaking supply chain strategies being implemented by Amazon, Unilever, Coca-Cola, and Colgate-Palmolive. Here in Part 2, we cover Starbucks, PepsiCo, Nestlé, and DuPont.

Whether they play in your industry or not, these organizations are choosing innovative solutions that offer lessons that transcend industry boundaries.

 

Introduction
The leading supply chain companies discussed below, many of which are pace- and trend-setters in supply chain excellence, offer lessons that span industry boundaries. The recent global economic downturn has led to an exciting and introspective time for global organizations: they’re all coming to the realization that the supply chain organization should no longer be seen merely as an opportunity to cut costs or push for efficiency gains. As Gartner’s Top 25 Report says, “It [the supply chain organization] sees itself — and is seen by its CEO — as a growth enabler.” 1

Starbucks (Gartner Ranking: #15)supply chain
Starbucks’ supply chain is a prime example of an outside-in approach. The organization measures the success of its supply chain starting with the customer, all the way back to the source of raw materials. The organization’s sourcing and distribution network is astounding — a supply chain that spans nineteen countries, where “cocoa beans can come from one country, while milk could come from an entirely different country hundreds of miles away”.2 Furthermore, their ability to make more than 70,000 outbound deliveries per week to stores across the globe demonstrates their ability to be truly demand driven.  Clearly this approach is working — the organization’s most recent annual report boasted record revenues and earnings per share, with increases in store sales, revenue, operating income and consolidated operating margin.

How are they doing this? Howard Schultz, Chairman, President and Chief Executive Officer of Starbucks, says that three attributes will continue to drive the organization’s every decision and action: “First, we will remain committed to our coffee core. Second, we will exercise relevant, timely and courageous innovation. And third, we will ceaselessly honour our values.”

PepsiCo (Gartner Ranking: #16)
Performance with Purpose is PepsiCo’s vision and goal to deliver “sustained, top-tier financial results through transforming their portfolio to sustain top line growth”, their commitment to reducing their environmental impact, and “providing a safe and inclusive workplace for employees around the globe to attract and retain the best talent”. This long term strategy, cited as being not just a vision, but the soul of the company, seeks to find the balance between thinking in terms of “both quarters and generations”.

Indra K. Nooyi, PepsiCo’s Chairman and Chief Executive Officer, says, “PepsiCo’s talented people are vital to our continued success, and we continuously invest in our associates, giving them the tools and training to succeed.”3   As part of the organization’s talent strategy for professional development, they have taken empowerment and training to the next level by way of the PepsiCo University. This is an innovative way of addressing the global skills shortage with a “train them yourself” ethos. The PepsiCo University houses five subsections: Finance, Global Procurement, Customer Management, Global R&D, and HR.

Furthermore, the organization embraces an inclusive workplace culture. To this end, they have implemented various initiatives such as increasing the number of women in the workplace, “recruiting people of colour” and “recruiting people from diverse ethnic backgrounds”.

Nestlé (Gartner Ranking: #21)supply chain
Nestlé is held in high regard for its Lean supply chain. But the organization, rightly, does not see Lean as a simple cost-cutting initiative. Rather, Nestlé’s holistic view on Lean is governed by Five Guiding Principles: Engage Our People; Understand Value — as perceived by consumers and customers; Evaluate Which Activities Add Value Or Not — looking at all processes within the value chain; Eliminate Non-value-added Activities; and Continuously Improve Value Creation.4

Furthermore, the organization takes a true end-to-end view of its entire value chain from raw materials all the way through to a happy customer. As such, Nestlé has implemented “Farmer Connect” — their sustainable sourcing initiative that seeks to “ensure long-term supply of safe, quality assured, regulatory compliant, and price-competitive agricultural materials to serve our brands to delight customers”. This initiative ensures traceability backwards through the supply chain right to the farmer’s level. Dealing directly with farmers is a good way of assuring quality and safety of raw materials, and, according to Nestlé, to “mitigate price volatility exposure and reduce transaction costs”.5

DuPont (Gartner Ranking: #30)
TRACC client DuPont didn’t make it into the Top 25, but they did make it into Gartner’s Supply Chain Top 25 follow-on report entitled “The Next 25”, which details organizations that ranked 25 through 50. According to the report, “A customer-focused supply chain transformation, segmentation strategies to help manage a diverse portfolio, and a continued focus on productivity characterize this leader.”

DuPont’s Supply Chain transformation efforts start with improving the customer experience, whilst simultaneously seeking to increase velocity and margins. The well-known DuPont Production System (DPS) has spearheaded a move to engaging business teams to enable organization-wide transformation with the introduction of Demand Led Fulfillment (DLF). DLF seeks to deliver to the customer with performance improvement across the entire end-to-end supply chain.

In Closing
When it comes to using your supply chain to enable growth, there are many ways to succeed. These leading organizations are taking their supply chains to new strategic heights through creativity and innovation. On the whole, trends that are delivering the most returns are “finding new synergies across best practices, partnering more productively for growth, and inspiring the hearts and minds of their supply chain talent in new ways.”1  

The organizations that are “inspiring the hearts and minds of their supply chain talent” all seem to have experienced the same fundamental realization: people who buy into the organization’s values, morals and ethics, are more likely to be loyal and to have a genuine wish for the organization to succeed. But they won’t buy into values, morals and ethics if these do not match their own. These engaged employees hold job satisfaction in high regard, and respond well when they see their organization doing things that make them proud, such as giving back to and empowering the communities in which they operate. Leading supply chain companies, Nestlé for example, have demonstrated through initiatives such as “Farmer Connect”, that doing the right thing also makes very real business sense, and if implemented correctly, can positively affect the bottom line so that everybody wins.

 

Reference list
1 The Gartner Supply Chain Top 25 for 2013
2 Supplychain247: Behind the Scenes at Starbucks Supply Chain Operations it’s Plan, Source, Make and Deliver
3 Pepsico.com: Letter from the CEO
4 Nestle.com: Accelerating performance through Globe/NCE
5 Nestle.com: Creating Competitive Gaps in upstream supply chains:

 
Note:  Read Part One of this article to learn about the ground breaking supply chain strategies companies like Amazon, Unilever, Coca-Cola, and Colgate-Palmolive are currently implementing.


Disclaimer
This resource has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained herein without obtaining specific professional advice. Competitive Capabilities International (CCi) does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this resource or for any decision based on it.

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