Diageo's Upgraded Maryland Blending and Packaging Facility (from Baltimore Sun)

Diageo’s Upgraded Maryland Blending and Packaging Facility
(from Baltimore Sun)

Last month I wrote a Logistics Viewpoints article titled “A Maturity Model for Supply Chain Progression?” In this article, I contended that the World Economic Forum’s Global Competitiveness Index (CGI), which measures national economic competitiveness, can also serve as a maturity model for supply chain progression. The CGI framework outlines 12 pillars of competitiveness and categorizes economies into three progressive stages of economic development. The three stages are 1. Basic, Factor Driven; 2. Efficiency Enhancers; and 3. Innovation-Driven. The most sophisticated stage, Innovation-Driven, is heavily reliant upon the pillars of Business Sophistication and Innovation.

I attended a session at CSCMP where a Diageo executive discussed the ongoing transformation of his company’s supply chain. This initiative is focused on enabling more efficient and effective processes in support of Diageo’s product innovation and new product introductions. I see Diageo’s transformation as an example of how business sophistication, in the form of supply chain alignment and advanced operations, and an innovation culture can support a company’s competitive progression.

Diageo’s Context
Diageo is a leading global provider of alcoholic beverages. The company owns numerous internationally recognized brands and produces about 4,000 different SKUs. Diageo’s extensive market share and product line has grown through acquisitions and from organic growth. Historically, the company’s supply chain was focused on cost-containment and took a conservative, low-risk approach to its operations.  But this focus was no longer ideally aligned with the changing market profile or the characteristics of their business.

Diageo realized it was operating in a North American market characterized by diversifying consumer tastes and increasingly granular market segmentations. In addition, the alcoholic beverage market offers high margins, making product availability particularly important to profitability.  As a result of these factors, the company’s supply chain was dealing with increased complexity and pressures to improve speed-to-market. Diageo responded with an approach involving an inherently agile supply chain that would properly align its processes with the current market dynamics and allow it to maximize profitability. Furthermore, the business transformation allowed the supply chain team to serve as an important enabler of this change.

Realigning the Diageo Supply Chain
Diageo spent over $250 million on its transformation that included a production network redesign, internal process enhancements, technology standardization, and a fundamental shift in focus from cost savings to product delivery and revenue growth. The company began by analyzing its markets and anticipating future growth patterns. From this process, it determined the optimal locations for its facilities. Once the desired locations were determined, Diageo purchased assets, upgraded facilities, and enhanced internal processes. They reduced the number of disparate planning systems down to two, and also standardized PLCs. Demand forecasting has improved as a result, providing better supply/demand alignment.

Investments were made on high-speed lines so they could bring in-house some production that had previously been sent out to partners. Perhaps more importantly, the company developed dedicated lines for agility and responsiveness. The ability to switch over lines so quickly is a critical element to the project’s success, as optimized production locations and the ability to quickly switch over lines provide quicker routes to market. This supports new product introductions and enables Diageo to be “first to shelf” and ultimately increases revenues from new products. In fact, Diageo stated that new products have been responsible for 28 percent of growth over the last few years.

Diageo continues to enhance its processes and systems. For example, an advanced planning and scheduling system is currently being rolled out. The Diageo speaker asserted that the region-wide project has been a success, measured by a 48 percent increase in overall equipment effectiveness (OEE) and a 30 percent increase in productivity.

John Butler MenloFor years, safety practice traditionally focused on the workplace environment in an effort to prevent personal injury. Formal and informal audits produced a long list of action items such as a hole in the floor, a damaged tool or poor lighting. Management would correct all of the noted items in a timely manner and feel good that they had fostered a safer workplace. While it is admirable that logistics companies are addressing identified hazards, those efforts may not go far enough.

Is the goal of “injury-free” too narrow? In today’s environment a company may brag about multiple years of injury-free performance, but what about other sources of risk? In my opinion, “harm-free” is a more effective measure of a company’s full safety performance. While prevention of personal injury remains a primary goal, it is important to include other sources of harm and risk. These sources include environmental harm, sustainability, cargo damage, equipment damage, facility damage, business interruption, vehicle accidents, negative media and the Lean wastes of time/money/energy. A logistics provider cannot rest on an injury-free record if they fail in any of these other categories.

Safety organizations such as the National Safety Council and the American Society of Safety Engineers advise that a majority of all reported incidents, rather than being attributable to physical workplace hazards, are caused by human behavior. So, have we been “spinning our wheels” all these years?

Cultural change in the workplace is required to affect human behavior. The answer may rest in a process called Behavior-based Safety. Behavior-based Safety (BBS) has existed in some form since the 1980’s but many companies may not have been ready for that type of cultural change. However, it may have a better chance of success in today’s workplace. BBS is a peer-to-peer observation process that pairs positive reinforcement with concern for risky behavior. It is an employee-driven process, not a top-down management initiative.

The first step is to identify the specific type of behavioral risk in your workplace. A manufacturing facility will have substantially different behavioral risks than a pallet-in, pallet-out warehouse. This is not a “one-size-fits-all” solution. Keeping in mind all of the risk sources mentioned earlier, conduct an analysis of all of the related incidents and near-misses that occurred in your facility in the last few years. Initially you will focus like a laser on the top three or four risky behaviors, rather than take the previous “shotgun” approach of identifying hundreds of potential issues. Once you have developed your focus list of risky behaviors, you’re ready for the next step.

Observers are selected from the hourly workforce and provided specialized training to identify risky behaviors that appear on the site-specific Pareto chart that analyzes root causes of past incidents. Training also includes how to speak with co-workers in a caring, non-confrontational manner. The foundational element of the BBS process is that it is anonymous and no corrective action may ever be associated with it. Observed employees must be able to be honest when asked why they are not taking a precaution in the workplace. Checklists focused on the top three or four risk behaviors only capture what is occurring, not who is exhibiting that behavior. When a worker is taking all precautions to avoid risk, the observer provides positive reinforcement. When a worker is taking a risk, the observer will ask why the worker is not taking the accepted precautions and record the response.

This anonymous data is aggregated, usually through software, and reviewed by a steering team, also consisting of line employees. The steering team will analyze the behavioral data and identify countermeasures to be implemented in the workplace. As each risky behavior is eradicated over time, the next focus item takes its place until all behavioral risks have been addressed.

Employee participation as observers or members of the steering team rotates over time to allow all workers to become engaged in the process. The result is a facility-wide mentoring pool. As new employees are hired, the mentoring pool can extend the lessons learned to the new associates.

The beauty of the BBS process as described is the simplicity of achieving cultural change. BBS is low cost and employee-driven, with few management time requirements. And it works!

Need help developing a BBS process at your workplace? There are companies that specialize in implementation of BBS processes. ProAct Safety (proactsafety.com) in The Woodlands, Texas, is an industry leader.

 

John Butler has more than 36 years of experience in the area of Occupational Safety and Health, including a Master’s Degree in the discipline from New York University. His efforts on behalf of workplace safety run the gamut from firefighting, light manufacturing, transportation, and air freight to warehousing and supply chain management. He has spent his formal safety career with Menlo Logistics and currently serves as the company’s Director of Safety.

You’ve been offered an interview for a supply chain position, and you need to prepare for it.  What next?

Research the Company – Before you ever go on an interview, you must first research the company and be fully prepared to answer the questions “What do you know about our company?” or “Why do you want to work here?”  If these questions are not asked, a candidate will almost always be asked if they have any questions.  Genuine questions about how a company competes in their market will be well received.

Go to the company’s website, spend time there.  If the company is public, read pertinent sections of the Annual Report, particularly about their strategy and how they go to market, the financials, and their products. You can search the document using terms like “logistics” or “transportation” to find details of their strategy that are related to your job.

Do Google searches using the company’s name and read about their successes and failures over the past few years. Understand who the big players in their industry are, and spend some time reading those companies web sites and Annual Reports.

Understand the Job Requirements – Make sure you really understand the job you are applying for; duties, skills, relevant experience, and other requirements.  If you are working with a supply chain recruiter, realize they can be a good resource to clarify responsibilities and provide insights into what the company is looking for.

Research the Interview Process – The Glassdoor website is a good resource.  They actually have a part of their site titled Supply Chain Interview Questions. If the company interviewing you is a big company, they is apt to be feedback on that company from candidates that interviewed for jobs there.  Good content is often provided surrounding the length of the interview, the interview process, the types of questions asked, and even specific questions that were asked.

scinterviewpicture

If you’ve been offered an interview from a company not in Glassdoor, the process is tougher.  Here your best resource is LinkedIn.  Using the advanced find feature of LinkedIn, you put in the following:

 

Keyword:  Supply chain or logistics

Company:  The company or division’s name

Once you type in the name, a box will appear that says “Current or Past.”  Select “Past” and hit “Search.”  A list of ex-employees will appear.  Ask to “connect” to employees that have left in the last few years, and then send them an email explaining that you have an interview opportunity with their former employee and ask if they would be willing to talk to you about their experience.  To be able to do this efficiently, you will have to pay a fee to LinkedIn, but it is not large and it is a good investment.

Prepare for Behavioral Questions – If GlassDoor and LinkedIn end up being dead ends, then prepare for behavioral questions.  Behavioral questions are becoming more common.    Behavioral questions are designed to elicit specific and detailed responses about the situations or tasks in which you were involved in previous jobs, the actions you took, and the results.  The questions sometimes start with the phrase “Tell me about a time when…”  The way to prepare for these questions is to focus on your most relevant accomplishments and achievements that relate to the core competencies they’re seeking for their position.  Those competencies are often outlined within the job description.  Commit to memory your top 4 or 5 achievement stories and be prepared to adopt those stories to the behavioral question.

Sell your Work Ethic – 3PLs are some of the biggest hirers in the supply chain arena.  Most work their employees hard.  Unless it is an analyst position, requiring IT or business intelligence capabilities, then you need to realize this won’t be a 40 hour a week job and may not even be a 60 hour a week job. Not surprisingly, 3PLs often have high turnover in their management ranks.  Hitting this head on can be effective, “I understand this is not a 9 to 5 job and that a lot of your hires can’t take the pace. If this means greater opportunities to learn and grow, then great!  I’m all for it.”  Of course, if you are a believer in life work balance, then you should not be interviewing with this company.

Practice Interviewing – Most colleges have Career Centers that will run mock interviews for students.  Share what you have learned about the company and interview process with the staffer and then do a mock interview.  If you are not a college grad, try and do the same thing with a family member or acquaintance that has had a successful business career.

Good Luck!

Categories Just for Fun
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Nigel the Parrott

Nigel the Parrot

Imagine this – You move to California from Great Britain. You decide you’re a bit lonely, so you buy a parrot for good company. You name him Nigel. You teach Nigel to speak, and he learns the language with the British accent that reminds you of home. Unfortunately, one day your feathered buddy flies the coop, and doesn’t return. As the years pass, you resign to the fact that Nigel is gone for good. Four years after Nigel’s disappearance, you receive a random call from a woman saying she has found him. That couldn’t be correct… but the computer chip you placed on him has identified the bird as your buddy Nigel. The woman puts Nigel on the phone, but your long lost buddy doesn’t greet you with a “Cheers” or a “Hello”, but instead says “Hola! Buenos dias!”Que pasó? Little is know about the whereabouts of Nigel over the last four years, but he is now a bilingual parrot. True story…with a couple embellishments by me.

Now on to this week’s logistics news:

Wal-mart’s CEO spoke to investors this week and said that the company plans to spend more of its capital budget on building up its e-commerce presence (logstics vendors, take note). Wal-mart has reported six consecutive quarters without growth in comparable sales (same store) in the US, according to the article in Fortune. The company is also placing focus on expanding its omni-channel commerce capabilities to give consumers greater choice in placing and receiving orders.

Prologis, the large international industrial building owner, is increasing the construction of warehouses in Europe to meet increasing demand for addition e-commerce fulfillment centers, according to Bloomberg. The article mentions specific areas including Poland and  the English Midlands. The article references CBRE Group stating that tenants are signing the most leases for industrial space in Europe since 2008. Prologis is expected to start building out 5.4 million square feet of warehouse space in Europe this year.

As another example of e-commerce’s affect on fulfillment centers, Singapore Post is going to spend $145 million on a new e-commerce logistics center to support the anticpated increase of online retailing in Southeast Asia. The facility will be 553,000 square feet and capable of handling 100,000 packages daily. Alibaba announced in May it intention to invest $249 million in Singapore Post as a stake in the international logistics business.

According to the New York Times DealbookCanadian Pacific Railway recently approached CSX about a potential merger. CSX has rail lines in the eastern US, while Canadian Pacific is primarily in Canada. There is little overlap in geographies, but such a deal would require regulatory approval. As an aside, access to shale oil transportation routes is the motivation that initially popped into my mind. However, I am unsure about the degree to which CSX serves shale oil transport routes. The article does mention that North American railroads are considered to be poorly managed, and the possible efficiency gains from instituting proper management may be the primary merger motivation.

FedEx Freight drivers in Pennsylvania have voted to become represented by the Teamsters Union. This is the first time drivers of FedEx Freight have chosen to be unionized. This vote follows an earlier vote by New Jersey FedEx workers, in which they rejected an organization attempt by the Teamsters. There are five more votes currently scheduled at FedEx terminals across the US.

FoodLogica e-Trikes

Foodlogica e-Trikes

Progress or regress? I guess it depends on your perspective. Treehugger.com reports that Foodlogica has introduced an e-trike food delivery service that promises “no emissions, no congestion, no polution.” The solar-powered trikes have a custom cargo box to carry packages and cartons. The base price for delivery is 15 Euros.

Rianovski reports that Kiev and Brussels (EU) have stated intentions to launch a free trade zone if Russia violates the the prior agreement. The article quotes the Ukranian representative, Valery Pyatnitsky, as stating

“There is a certain probability – and I’m not implying that this probability is high – that the Russian Federation will withdraw from the agreements, reached in Brussels; in this case, of course, other parties will also be freed from the agreements achieved,”

It sounds to me like the EU and the Ukraine are hedging their bets, or attempting to reinforce the benefits of complying with the agreement. Russia also stated that it would introduce measures should Kiev and Brussels implement the economic actions that were agreed to be delayed.

Have a great weekend!!

 

 

 

 

 

Categories This Week in News
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mondelez logoOne of the key aspects of omni-channel retailing is merchandise availability. This pertains to the store, warehouse, and distribution center. With so much effort and focus being spent on building out omni-channel strategies starting at the store, merchandise availability within the store is of critical importance. Another company that presented at the CSCMP Annual Global Conference in San Antonio, TX was Mondelēz International. Headquartered in Deerfield, IL, Mondelēz International comprises the global snack and food brands of the former Kraft Foods. The company manages well known snack brands around the globe in different categories, including cookies and crackers (Oreo; Chips Ahoy!; and Triscuit), chocolate (Côte d’Or, Toblerone, and Cadbury Dairy Milk), and gum and candy (Trident, Chiclets, and Halls). The company’s presentation focused on a growing concern for many brands: Direct Store Delivery (DSD).

One of the major issues for a retailer is whether they have the merchandise in the store. Often, a retailer receives a truck with items and merchandise from multiple manufacturers and distributors. However, other brands choose to utilize the DSD model. The DSD model is mostly seen in the food and beverage industry, especially at smaller convenience and grocery stores. Direct Store Delivery gives the manufacturer more control over replenishment and merchandising within the store. However, one of the major problems is the case of late deliveries. If a retailer is waiting for a specific delivery to finalize merchandise assortments, and it is late, it can throw off the entire day’s plan.

DSDMondelēz International came up with a solution to this problem, and sees the solution as the future of their DSD operations: mobile logistics. The mobile logistics platform is used to manage alerts and deliveries, comply with safety and DOT requirements, track assets through GPS, and provide basic communication functions. The introduction of “late alerts” was groundbreaking for the company and its retail partners, as it allowed the merchandiser to re-prioritize their day. Rather than waiting and wondering what time the delivery would arrive, they had an updated delivery time-frame which allowed them to focus on other tasks.

According to Mondelēz International, the biggest challenge was linking the three main components to DSD: the driver, the retailer, and the customer care center. The company was able to synchronize sales and distribution communication to establish a single roadmap for all three parties. By connecting the driver with the retailer, it eliminated the need to rely on customer care to deliver the message. In the past, the driver would contact customer care to let them know they were running late. In turn, customer care would contact the retailer. This delayed the process and did not always guarantee the right information was shared. The new connection allows the driver to communicate directly with the retailer with real-time updates. The result was growth in sales and a higher percentage of on-time deliveries.

Looking forward. Mondelēz International plans to continue to build out their mobile capabilities. From driver tracking to insight into multi-day rates, enhancements are expected to be added through-out the remainder of 2014 and beyond. The overall capabilities will eventually be leveraged globally for all area that use DSD as part of their distribution model.