Take Joy in the Journey: Supply Chain Advice from Fred Berkheimer

Fred Berkheimer recently retired from Unilever after a 29 year career.  For the last ten years, he was the Vice President for North American Logistics with responsibility for managing both internal logistics and logistics outsourcing relationships.  Along the way he worked as a process engineer, in packaging, in facilities management, and as a factory manager (at one point he managed about half of Unilever’s factories in the US).  When Fred sent me an email telling me he had retired, I knew I wanted to interview him for an article.

The question I posed to Fred was this: If you were appointed the top supply chain executive at a new company, what would be the top five things you would task yourself with accomplishing?  Fred mulled this question over for a few days and then we talked.  Here is Fred’s top five list.  The top three are listed in the order in which he would tackle them; items four and five are not necessarily sequential and might best be worked on simultaneously.

1. Build Functional Excellence – whether it is in planning, logistics, procurement, or other areas, and hire or develop people that have a great depth of knowledge in their area. This he considers the “blocking and tackling” of making sure things run well. Metrics and KPIs focused on a particular functional area have a role to play here. Fred made the point that in the age of outsourcing, this has become harder to do. When Unilever outsourced all of its warehousing to 3PLs, the company used one of its functional experts to manage those relationships. However, when this man retired, Unilever found it no longer had the internal expertise to effectively manage those relationships. If you are forced to go outside the organization and hire the expertise, there is always the risk that the new hire won’t be the right fit for the culture.
2. Install a Customer Service Mindset Across the Supply Chain – Fred is a big fan of Ritz Carlton’s service credo. Ritz Carlton has 12 service values and 3 steps to service. Every day, every employee reviews one of the fifteen service steps or values. The next day they review a different step or value. This is the foundation of building strong customer service across the entire organization. He thinks a similar credo is important in the supply chain area. It may be that you are serving the internal supply chain, in which case the downstream function becomes your customer. But at the end of the day the organization must have its eye firmly on the end customer. At Unilever, the company created customer service logistics roles. Logistics personnel, together with sales, would call on customers to determine how better logistics performance could contribute to more sales.
3. Commit to a Continuous Improvement Process – Fred does not care whether it is Lean, Six Sigma, or Total Quality Management. What is important is that this operational excellence process is understood across the entire supply chain, that everyone uses a common vocabulary, and that everyone participates. As you move to outsourcing arrangements, it is also critical that your supply chain partners speak the same language, use the same process, and are committed to a collaborative approach to continuous improvement.
4. Install a Single Team Success Philosophy – to avoid a silo mentality. If procurement buys something and they claim they have saved $10 million, but there are quality and delivery problems associated with that buy, the reality is that instead of saving $10 million they may have cost the company $5 million. If you use 3PL partners, they need define success in the same way. They will inevitably be concerned with their profitability, but metrics need to be put in place to make sure that there is a holistic approach to tracking and measuring supply chain activities. There is no magic metric that applies here. However, attention needs to be paid to balancing three categories of metrics – cash-to-cash, working capital, and customer service.
5. Develop Personnel with Broad, Extended Supply Chain Knowledge – It is important to have functional experts, but organizations also need people who have a broader understanding of the extended supply chain at the company. He is a big believer in growing future managers who have worked in at least two or three functional areas, ideally adjacent to each other. So, a future warehouse manager would ideally have worked in transportation and customer service. In the hypothetical example he gave about the procurement person thinking he is saving $10 million but is actually costing the company $5 million, Fred points out that this would be much less likely to occur if that person had experience in manufacturing and quality.

Finally, Fred believes that if you are not having fun, you need to find something else to do.  You need to take joy in the journey!