In the industry-specific section of our 2014 Predictions for the current year, (full research report available for complimentary downloading in our Research Center) we specifically addressed consumer product goods supply chains where combinations of external forces are providing unique challenges. That force includes contraction of growth rates and margins from previously expanding emerging markets, a certain group of activist investors demanding more cash value, and now, increases in key commodity costs.
Some CPG supply chains are rising to the task while many continue to deal with challenges on multiple fronts.
Global CPG giants such as Nestle and Unilever have managed to meet investor quarterly earnings expectations yet continue to report growth headwinds concerning emerging markets along with currency challenges. The CEO of Unilever recently told business network CNBC that emerging markets use to be in the range of 6 to 8 percent but now range 5 to 6 percent. Nestle’s organic growth targets of between 5 to 6 percent are currently trending at 4.6 percent. Unilever currently garners 60 percent of its revenues from China, India and other emerging consumer markets. Mondelez International reported its fiscal fourth quarter earnings this week and reported that organic sales rose declined 6.1 percent in the Asia-pacific region while revenues specifically in China declined by the mid-teens. Supply Chain Matters featured a previous commentary regarding the Kellogg Company.
Noted exceptions of late have been Procter & Gamble and Kimberly-Clark. P&G recently reported that demand for its products in emerging markets such as Brazil and China remains strong. However, P&G reported a 16 percent drop in profits largely due to unfavorable exchange rates. Kimberly-Clark reported that its emerging market business continues to grow strongly. Today, Campbell Soup indicated a solid quarterly performance including growth in certain emerging markets.
The U.S. market further presents its own challenges as economically distressed consumers continue to opt for price-sensitive products in their purchases. Today’s edition of the Wall Street Journal reports that many European based consumer goods companies had relied on sales in Brazil, China, Mexico and other Asian countries to maintain revenue and profitability momentum while developed markets remained sluggish. We would add that these same companies made significant investments in supply chain fulfillment networks in these regions as well.
On the activist investor front, PepsiCo indicated this week that it continue to focus on expanding its soft-drink product revenues instead of taking actions to split-up the company, which certain activist investors are demanding. To continue its course, the company indicated it was investing $8.7 billion in stock buybacks, increasing its cash dividends by 35 percent in the current year, and will initiate $1 billion in productivity gains, including job cuts, through 2019.
There is now the additional challenge of increased commodity costs. On the occasion of Valentine’s Day here in the United States, the Wall Street Journal featured a report that growing demand for chocolate products, particularly from emerging consumer markets, has driven commodity prices for cocoa up 9 percent this year, to levels not reached since 2011. Once more, an industry trade group boasts that demand will outstrip limited supply for the next five years, the longest shortfall since 1960. This week, U.S. cocoa futures hovered in the high $2900 a ton range, a 29 month high. The implication is that with these current signposts, chocolate makers such as Hershey Foods, Mars, Mondelez, Nestle and others will face decisions for raising prices, adding more pressure to existing product demand and profitability trends.
Indeed, consumer product goods industry supply chains have extraordinary challenges to overcome. Supporting emerging market growth objectives requires laser-focused investments in channel customer fulfillment and distribution capabilities. Companies such as P&G provide evidence that such a laser focus can provide benefits and continued growth.
Continued relentless pressures for continued productivity and cost reductions are impacting the marrow of people resources, and further require out-of-box thinking. A dependence on past efforts at continuous improvement or past industry productivity benchmarks will not help in the current environment. With added challenges for increased input materials costs for certain key commodities, the challenges become ever more dynamic.
In 2014, CPG supply chains will require bold leadership and innovative thinking. Business-as-usual has long passed, and so has continuous improvement mentalities. Integrated supply chain management, more timely and responsive decision-making and the laser-like investments in productivity and cost management loom large.
We certainly encourage our readers residing in consumer goods supply chains to share learning from the current environment in the Comments section below.
© 2014 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters Blog. All rights reserved.
Disclosure: The author of this posting has a modest holding in Unilever stock.
Members of the supply chain management and B2B community are literally bombarded every day by user survey results. The reasons are many and unfortunate, since by our view, surveys have become too excessive. They are driving survey fatigue and more importantly, drowning out the surveys that provide the most insightful information.
Industry analysts and technology providers leverage quantitative and qualitative surveys to gain perspectives on the current challenges and viewpoints across multiple supply chain environments. Industry trade publications and conference producing firms utilize surveys to attract attendance at various conferences or utilize conference attendees as sounding boards. Academics utilize surveys to identify areas for advanced research or academic based thought leadership.
The reasons are many and in this commentary, we will not dwell deeper into motivations.
For you, our readers, it is important to not just dwell on the executive summaries or conclusions of such surveys, but to pay particular attention to the demographics, statistical survey base, and lineage of such surveys. Look for statistical valid sampling, clear statements of the surveyed demographics, and more importantly, look for surveys that are consistently performed in a pre-prescribed basis, since they provide the most insights into shifting patterns of challenges and needs.
We view our role at Supply Chain Matters as not pitching endless summaries of our own research (we do conduct and produce such research), but more importantly to point out to readers various surveys that are grounded in discipline and believe warrant your attention.
We were recently alerted to a 2013 ISM Survey of Procurement Executives (complimentary report requiring reader registration) sponsored jointly by the Institute of Supply Management (ISM) and supply management technology provider, BravoSolutions. This report captured our interest because of both its demographics and its implied conclusions regarding the current priorities from procurement executives from mostly mid-market firms. The survey itself yielded over 500 responses, which is fairly good by today’s standards. The demographics included the majority of respondents, 64 percent, from non-manufacturing industries such as agriculture, energy, mining, professional services, transportation, retail and other services segments. Firm size was weighted toward 45 percent with revenues under $500 million and 56 percent with annual direct spend in the range of under $50 million to $249 million. Thus, this survey can serve as a representation of current challenges and viewpoints among mid-market service providers, an area we normally do not come across.
In terms of our key takeaways from this survey, we noted that improving cost reduction and savings was by far (60 percent of respondents) the top business priority in 2013 for these mid-market procurement executives. Yet, these same respondents indicate they have only been able to deliver 10 percent or less in savings during 2013. The remaining top five priorities were rated as:
2. Revenue growth and profit improvements
3. Risk management
4. Procurement transformation
5. Supplier performance and sustainability management
By our view, while we were pleased to see that risk management has finally reached a top-three weighting of priority. Half of the respondents’ firms were prepared to mitigate what were described as reasonable levels of supply, supplier or operational risk.
Far lower in 2013 priorities, according to this survey were areas such as employee retention and training, improving regulatory compliance, improving the strategic nature of customer priorities and technology implementation. Merely 19 percent indicated that supplier collaboration and innovation was a stated priority. The latter noted lowered rated priorities can clearly be considered important enablers to the top three priorities. These lower-ranked priorities are another symptom of the need for broader influence skills for procurement.
This author had the opportunity to speak with Mickey North Rizza, Vice President of Strategic Services at BravoSolutions about the implications and messages embedded within this survey. Readers may recall that Mickey was a very able and insightful supply management industry analyst at AMR Research and Gartner, before joining Bravo. We hope to feature Mickey in a future guest posting on Supply Chain Matters.
Mickey pointed to the continuing challenges of business process alignment among procurement teams, including more direct links to a firm’s sales and operations planning (S&OP) process, actively working towards broader cross-functional business alignments in joint initiatives along with a renewed emphasis on change management. Deeper partnerships and dialogue with IT regarding goal prioritization and technology’s enablement of these business goals, including options in today’s cloud-based computing applications certainly plays an important part.
There is a considerable amount of detail included in this ISM survey and we encourage our strategic sourcing and procurement readers to take the time to scan each of the highlighted areas. We especially call attention to a Table noted on page 16 of the report that describes the following: “To have world class suppliers we need our suppliers to ….”
In the important challenge of overall procurement transformation, respondents of the latest ISM survey report that while good progress has been made, many challenges remains. While mid-market firms often operate in lean environments and often do not have deep investment budgets, they can benefit from the learnings and insights from other transformation successes across industries including manufacturing-centric. Today, more than ever, the barriers to driving successful organizational change management and more affordable options in the ability to leverage advanced technology towards deeper procurement intelligence and insights have come down. Reach out and learn.
Prediction Five of our Supply Chain Matters 2014 Predictions for Global Supply Chains outlined three industry-specific supply chain challenges. One was Consumer Product Goods (CPG) sector challenges, specifically the heightened appearance of activist investors who actively advocate measures of either financial engineering or added cost controls on one or more CPG companies to extract more perceived investor value. These efforts will place added cost reduction burdens on the targeted company supply chain, burdens that could possibly impact operations.
This week provided yet another dynamic update on this trend. Business media reported yesterday that Nelson Peltz of Trian Fund Management has won a board seat at Mondelez International. However, Peltz has agreed to relinquish his active efforts to seek the merger of Mondelez with the snacks division of PepsiCo but reserves the right to continue to advocate that PepsiCo split out its snacks business as a separate entity.
The Wall Street Journal characterized this development as a qualified victory for Mr. Peltz who has lobbied for months that Mondelez improve its profit margins, specifically improving profit margins to 18 percent from the current 12 percent. The WSJ reported that Mondelez management agreed to this move to quell public criticism of the company as well as avoid a public proxy fight. Now having a board seat, Peltz can escalate his calls for added profit margins.
Mondelez was formed with the split of the cookies and snacks businesses of Kraft Foods, and was preceded by Kraft’s controversial acquisition of global snacks provider Cadbury. The cumulative effect of all these moves was to extract hundreds of millions of cost savings from supply chain operations, including capacity consolidation and facility closings. The savings garnered from supply chain cost reduction were channeled to fund new sales and marketing initiatives as well as stock buyback. Late last year, Mondelez management called for a 5 percent margin improvement by 2016 which amounted to $3 billion in savings. That initiative may now be the subject of further board discussion as to amount and timetable.
Peltz has previously accumulated a large stake in DuPont, which in October announced that it would split-off its performance-chemicals business.
Meanwhile, activist investor Daniel Loeb is pressuring Dow Chemical to split itself into two companies, one bring petrochemicals and the other specialty chemicals. Dow management had laid out a plan in December to exit some low-margin chemical businesses amounting to about $5 billion in current revenues, but Loeb is advocating that the entire petrochemicals business is hindering margin performance.
The chemicals business has high exposure to supply chain costs and efficiencies since transportation and logistics are higher cost components.
Thus, not only are certain CPG supply chains under activist pressure, we should consider adding certain chemical industry supply chains as well.
Supply Chain Matters kicks off our 2014 commentaries with an update on Boeing’s newly announced 777x aircraft sourcing plans. When we last updated readers before the Christmas holiday, Boeing was in the midst of wide scale RFP efforts among prospective U.S. states to secure the most lucrative incentives to locate 777x production facilities in those states. Meanwhile the company had lobbied hard for both the State of Washington and the International Association of Machinists labor union to grant concessions to continue production of the new 777x family in the greater Seattle area.
Just after the New Year, an election was held among Seattle based union membership and by the narrowest of margins, 600 votes out of nearly 24,000 cast amounting to a 51 percent to 49 percent margin, the proposed eight year labor pact extension was ratified by the union. In its reporting, the Wall Street Journal characterized the ratification as a reflection of a deep divide within the machinists union when all the concessions are tallied. Boeing also secured close to $9 billion in tax incentives from the State of Washington, literally a 16 year extension of incentives first granted in 2003 to source aircraft production in the state. The incentives package itself was described as the largest of its kind in U.S. history and assures that new generation 777 production will remain in the Seattle area.
The WSJ further reported that Boeing pressured potential 777x suppliers for cost savings as well under the umbrella of its Partnership for Success program which was an offshoot of the troubled 787 program. Canada based Heroux-Devtek Inc. was reported to have won a contract to supply landing gears over United Technologies which had been at odds with Boeing’s quest for cost savings. The company had been the previous sole source supplier for the current 777 landing gear. There are probably similar supplier developments occurring or about to occur in the coming months.
There is little doubt that Boeing has and is taking a hard negotiation stance in its efforts to deploy the new generation 777 supply chain. The objectives would seem to be cost and margin led.
The learning of the troubled 787 Dreamliner program that included overly aggressive global sourcing and too much value-chain dependence on suppliers has led to a strategy of more in-house sourcing by extracting considerable cost, labor and productivity concessions. Strategic sourcing and procurement executives would recognize this as hardball negotiations similar to what occurred in automotive supply chains in the not too distant past. The result in the automotive sector was a near collapse of the supplier ecosystem as suppliers suffered the burdens of the cost and technology development savings of OEM’s.
In the wake of this strategy remains a deeply divided labor union, a collection of U.S. states who had to scramble to put together and pass concessions that now are passing memory, and a more troubled group of strategic suppliers who once again can sense a my way or the highway collaboration model.
The new generation 777 promises even more technological breakthroughs and aircraft innovation yet the supply chain strategy thus far has been labor, overhead and cost component led. The question of how successful these tactics ultimately will be is certainly the topic of many future conversations formal and informal.
This is collaboration of the Boeing style and many months will unfold before we as a B2B and supply chain community can ascertain whether it leads to ultimate 777x program success for the company. Suffice that the Boeing 777x value-chain tactics initiated in early 2014 will be the guidepost in the many months to come.
Once a year, just before the start of the New Year, the Ferrari Consulting and Research Group and the Supply Chain Matters Blog provide our series of predictions for the coming year. These predictions are provided in the spirit of advising supply chain organizations in setting management agenda for the year ahead, as well as helping our readers and clients to prepare their supply chain management teams in establishing programs, initiatives and educational agendas for the upcoming New Year.
In Part One of this series, we unveiled the methodology and complete listing of our 2014 predictions.
Part Two in this series summarized Prediction One related on what to expect in the global economy and Prediction Two, what to expect in procurement costs.
Part Three summarized Predictions Three, continued momentum associated with the resurgence in U.S. and North America production, and Prediction Four, talent recruitment and retention as a continued challenge.
Part Four addressed some unique industry specific supply chain challenges in 2014.
Part Five predicted increased implications regarding current supply chain social responsibility strategies and practices.
Part Six explored the implications of increased supply chain risk on global sourcing strategies in 2014.
In this posting, we dive into Prediction 8 related to expected global transportation developments and shifts, along with Prediction 9, increased momentum in the “Internet of Things”.
Prediction 8: Industry Re-structuring of Global Transportation Surface and Air Networks Increases Momentum in 2014 as Carriers Adjust to Realities
In 2013, global ocean container lines, air freight and surface transportation carriers experienced the presence of shippers that continue to elect, because of budget reasons, more economical and less priority prone transportation options. The reasons were obvious for shippers. A continued uncertain global economy, along with the effects of severe recession in the Eurozone motivated shippers to rely on more economical and cost effective transportation modes. In surface transportation, a rather volatile environment of actual vs. stated tariff rates had some shippers opting for spot market tendering to take advantage of less costly rates than those contracted. Improved planning of supply needs coupled with broader inventory visibility across the global supply chain provided more confidence among shippers to opt for regularly scheduled surface transportation.
Shifting patterns for product sourcing and increased momentum for near-shoring of production and distribution is further contributing to the trend. Supply Chain Matters featured a number of commentaries regarding global transportation industry structural shifts, rate trends, and what we viewed as a failure of the industry to deal with blatant realities of quickly changing global sourcing and trade patterns and too much capacity chasing lower transport volumes
Global transportation and logistics giants FedEx and UPS incurred a series of consecutive quarters where capacity allocated for priority air movement was significantly underutilized because of the shipping trends noted above. Each of these carriers in turn, have taken proactive measures throughout 2013 to re-structure or re-align excess capacity dedicated to priority movements and at the same time, initiated efforts to compensate for lost revenues and potential profits with either rate increases or further expense reductions. Both carriers have announced rate increases ranging from 3.9 to 4.9 percent for ground and air shipments in 2014.
In ocean container segment, the picture is far more complex and troubling. According to the United Nations Conference on Trade and Development Review of Maritime Transportation 2013, growth in 20-foot equivalent units (TEU’s) slowed significantly in 2012 with a volume increase of 3.2 percent. This was down from 7.1 percent from 2011, and 13.1 percent in 2010. Final volume numbers for 2013 may slightly exceed 2012. Multiple years of excess shipping capacity is now exacerbated by the ongoing delivery of massive new mega-ships designed to carry far more containers at a lower overall cost. As an example, over the next two and one-half years, industry lead Maersk alone has plans to introduce into global service 20 new mega-ships, capable of transporting up to 18,000 containers with up to 35 percent less consumption of fuel.
A troubling global economy and certain cutbacks in global trade have not help. The problem has been compounded by carrier optimism that global shipping movements would eventually return to growth. An overall reluctance to maintain excess capacity has led to hemorrhaging balance sheets for shipping lines with multiple unsuccessful and some successful attempts to increase shipping rates to compensate for lost revenues and excess fixed debt and operating costs. In the latter part of 2012, the industry anticipated 4 to 5 percent volume growth only to discover that demand turned a negative 2 percent.
In January of 2013, the CEO of industry leading Maersk revealed in an interview with the Financial Times that the carrier was losing $8m-$9m daily. By October of 2013, the CEO of Maersk indicated in an interview with business network CNBC that “the worst is over for the global shipping industry but so are the glory days.” That was clarified to a statement that most goods that can be shipped by ocean container are already being shipped with little silver bullets of shipping on the horizon. We viewed that declaration as an industry milestone.
As we pen this prediction, the top three ocean container lines have a proposal before multiple global regulators to pool capacity and global scheduling under the termed P3 Network. Another industry consortium, the termed G6 Alliance announced plans to expand their cooperation in certain global routes. Each of these initiatives require regulatory approval and there is lots of speculation as to whether governmental agencies will sign-off on such actions involving the management control of hundreds of vessels across key global trade routes. On December 5th,news broke that sixth ranked carrier Hapag and 20th ranked CSAV were engaged in merger discussions, If both lines were to merge, the combined entity would rank fourth globally. In would as well motivate other potential player moves.
For all of these reasons, industry supply chain should anticipate increased momentum in the re-structuring of global transportation capacity and networks. What is unclear is the eventual impact on transportation rates or schedule performance, either from a positive or not so positive perspective. An optimistic scenario is that container lines and air freight carriers are successful in re-structuring networks to maximize efficiency, service, newer fuel-efficient equipment and lower overall operating costs, to benefit of shipping rates. Another scenario, particularly for the ocean container segment is more accelerated consolidation and fallout of marginal carriers. Efforts to expand consortium influence on control and management of capacity and rates will not be well received by regulators and influential shippers.
The bottom line prediction is that procurement and shipping leaders should expect continued global transportation developments during 2014 and close relationships and contracting arrangements with trusted carriers will be important during this period. However, there may continue to be cost affordable transportation options by venturing into the spot market.
Prediction Nine: Internet of Things Picks-up Considerable Momentum
In April 2012, The Economist magazine declared the coming of what it termed as “The Third Industrial Revolution”, a new era from the second industrial revolution that began in the 20th Century with the advent of assembly line manufacturing in the United States. This new era is enabled by the increasing digitization or individualization of manufacturing processes. Cited were continued breakthroughs in 3D printing, individualized or additive manufacturing techniques, faster and more sophisticated engineering and manufacturing simulation and the increased benefits derived from the “Internet of Things” or machine-to-machine (M2M) technologies. And, it is not just a revolution in manufacturing, but in how services related to manufactured products will be delivered.
The Internet of Things provides a new era of interconnected and intelligent physical devices and/or machines that will revolutionize supply chain processes related to production, transportation, logistics and service management. IDC recently predicted 30 billion autonomously connected endpoints and $8.9 trillion in revenue by 2020. It will profoundly impact both product and service focused supply chains in months and years to come and we predict more increased momentum in 2014.
Automotive and truck OEM’s continue to design and deploy smarter on-board technologies affixed to Internet connectivity in motor and commercial transit vehicles facilitating far more responsive and efficient methods to track operational status, route vehicles, or revise routing on a real-time basis.
In 2013, General Electric made a major product design and deployment commitment to what it termed as the Industrial Internet. The conglomerate characterizes industrial internet as a combination of sensor, software, analytics, data visualization and other technology tools integrated into complex machines such as turbines, locomotives, aircraft engines and other equipment. Industrial Internet is further described as providing contextually relevant information in a near real-time basis that can monitor, control or modify actual conditions of industrial assets. Readers might recall current GE television commercials that provide visuals of aircraft engines communicating to maintenance teams current operating performance parameters and alerting to when maintenance will be required to avoid downtime. In its initial announcement, GE announced partnerships with a variety of other information technology and services firms including Amazon Web Services, AT&T, Cisco, Intel, Pivotal, among others and reinforced the emergence of new and previous unheard of vendor ecosystems that bring together manufacturing OEM, technology and service firms collaborating on enablement and delivery of more innovative products and services enabled by Internet real-time connectivity and more powerful analytical tools.
M2M facilitates needs to synchronize manufacturing devices and/or networks to the pace of market demand and further enable mass customization of products. It further accelerates asset intensive manufacturer’s needs to enable broader product platform-as-a-service services that help customers to avoid large up-front investments in capital equipment in favor of forms of “pay by the hour” leasing and service agreements over multiple time horizons. It helps manufacturers to build annuity type revenue and profitability opportunities.
We believe that M2M and smarter machine investment and development efforts will expand beyond just the United States but to other geographic regions and will feature more announcements from well noted global based players in both manufacturing, services and technology circles. Following typical investment and development cycles, efforts will continue toward most promising business cases for M2M, and we believe that will center squarely on the capital equipment intensive services management segment. We expect other developments to come in the logistics and transportation services segment.
Expect other announcements from global players such as Siemens which will lead to additional partnerships as influential industry players, both classic manufacturing and tech-focused, jump on to building market momentum. We agree with current industry participants that security remains an important obstacle to broader deployment and it will be important for 2014 development efforts to focus on stronger network and data related security measures. A further open question is whether more organizations are ready to leverage M2M networks for product innovation, or have the resources and where-with-all to do so. For the time being, GE has a huge leg-up in this area.
This concludes Part Seven of our Supply Chain Matters 2014 Predictions series.
Keep your browser focused on Supply Chain Matters as in an upcoming posting, we conclude this series with our final predictions related to information technology in 2014.
As always, readers are encouraged to add individual or their own organizational perspectives to these predictions in the Comments section associated to each of the postings in this series.
© 2013 The Ferrari Consulting and Research Group and the Supply Chain Matters Blog. All rights reserved.
Supply Chain Matters provides a follow-up to the previously announced acquisition of noted consumer product goods manufacturer HJ Heinz. This multi-billion acquisition by the combination of 3G Capital and Berkshire Hathaway earlier this year sent shockwaves across CPG industry supply chains because of the ramifications.
Yesterday, Heinz announced that it is consolidating its North America production operations after previously announcing corporate restructuring impacting 1200 people.
According to a published report in the Pittsburgh Post-Gazette, Heinz management announced that it would close three plants in North America in the next six to eight months, affecting 1,350 jobs in South Carolina, Idaho and Ontario, Canada. The Leamington, Ontario production facility was making ketchup among other products for more than a century. When that plant closes next year, 740 jobs will be lost. The Florence, South Carolina plant, which employs 200 people, makes Smart Ones frozen foods and had only been open a few years. The Pocatello, Idaho, plants produces frozen entrees and snacks, and it employs 410 people.
In-turn, the company plans to shift production to five existing plants in Ohio, Iowa, California and Canada, adding a total of 470 positions at those sites. It further indicates that it intends to invest more in these remaining sites although specifics are lacking.
According to the Gazette article, Heinz trimmed 600 office positions in its North American operations, including 350 jobs in the Pittsburgh area this summer. Layoffs also have come in other parts of the global company’s operations. In September, Heinz reported in a regulatory filing that about 1,200 employees had been affected by its restructuring.
As noted in our February commentary, 3G Capital has demonstrated a previous track record of wringing-out operational costs from previous its M&A efforts at AB In-Bev and Anheuser Busch, along with Burger King. The Heinz effort now rapidly continues with these continuing series of announcements.
Wall Street insiders conclude that previous efforts at cost cutting and headcount reductions have run their course across the CPG sector and the new path to growth lies in more industry consolidation and financial engineering. In the light of challenging revenue headwinds, CPG company senior executives, in order to ward off these threats, continue to support aggressive stock buy-back programs with available cash to potentially block a hostile takeover.
Just this week, Supply Chain Matters noted a judgment in the dispute between Starbucks and Kraft over packaged coffee distribution. The awarded $2.8 Billion arbitration award in that case is slated to fund additional stock buy-back by Kraft spin-off Mondelez International, which is under threat from activist investors wanting to form a new global snack foods giant. The Kellogg Company has also embarked on a multi-year supply chain efficiency and effectiveness effort.
The threat of a renewed hunker-down emphasis has the potential to once again foster highly lean CPG supply chains with little flexibility or capability to respond to more demanding customers, market opportunities or global risk. It leads to a different set of dynamics where cost-cutting once again becomes the dominant force and efforts toward supply chain transformation take on more short-term orientation. Perhaps Heinz will be different- perhaps not.
Some would argue, in the spirit of Darwinism that this is the current natural order of things, and that financial engineering accomplishes transformation in far speedier manner. Some can argue effectively that the cost in employee dedication, loyalty and innovation takes an even heavier toll, especially when a chosen few reap the financial rewards while added debt burdens the victims.
It is unfortunate that this is the current state of affairs among CPG supply chains.