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Campbell Soup Elevates Role of Supply Chain Management

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From time to time, Supply Chain Matters will highlight supply chain management leadership appointments that provide our readers insights into specific supply chain challenges.

One we did want to highlight was a recent organizational announcement by Campbell Soup. Co., which last week promoted three internal executives into wider senior responsibilities that include membership for the corporate executive leadership team, reporting to the firm’s CEO.  campbells soup can 350 175x300 Campbell Soup Elevates Role of Supply Chain Management

In the Campbell announcement, CEO Denise Morrison states in part:

As the external operating environment continues to evolve at a rapid pace, it is critical that we adapt our organization along with it to realize the potential of our Purpose, ‘Real food that matters for life’s moments.’ We are elevating these roles in recognition of the strategic importance they play for our business and our growth plans.

Bob Furbee, a 32-year employee of Campbell’s was elevated to Senior Vice President of the Campbell Soup Company and Senior Vice President of Global Supply Chain. The announcement indicates that Furbee: “will lead efforts in creating an integrated supply chain organization designed to deliver new capabilities and efficiencies to drive growth.” Most recently, Mr. Furbee was Senior Vice President of Supply Chain for Campbell Soup America’s Simple Meals and Beverages business segment, where he held leadership responsibilities for manufacturing, distribution logistics, procurement, and customer service for the Americas division.  Furbee’s background At Campbell’s includes international experience as well having led European supply chain and operational activities.

What Supply Chain Matters found significant was the emphasis on driving top-line revenue growth as well as ongoing efficiencies. That takes on special significance for an industry faced with significant forces of external change brought about by changed consumer consumption and buying preferences as well as game-changing shifts occurring at the retail grocery level. Frankly, we would expect other CPG producers to elevate the role of supply chain management beyond that of a cost line related to operations and more toward a key enabler of needed business changes and desired business outcomes.

In addition to supply chain, other executive leadership elevation included an expanded vide-presidential role for corporate strategy with the appointment of Emily Waldorf, and the leadership of a single, integrated U.S. sales organization under the direction of Jim Sterbenz.


Breaking: Amazon to Acquire Whole Foods- An Obvious Industry Inflection Point

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In the history of any industry, along with its associated supporting supply chains, there comes a seminal series of events that ultimately point to a major inflection point, one that clearly indicates that business-as-usual is no longer an option. For the food and grocery industry, and all of its supply chain stakeholders, the year 2017, in the second week of June, two thunderbolt events ignited a seminal industry change.

As we pen this Supply Chain Matters posting, business and general media are broadcasting the headline announcement that Amazon intends to acquire Whole Foods Market for $42 per share, or more than $13 billion, a clear and obvious effort to directly penetrate the retail grocery landscape. This is Amazon’s largest acquisition to-date, and no doubt, there were likely multiple choices. In the press release announcing the acquisition, Amazon CEO Jeff Bezos indicated that the attraction to Whole Foods was the wide offering of natural organic foods.   FBA sized Breaking: Amazon to Acquire Whole Foods  An Obvious Industry Inflection Point

By our lens, healthy margins, a loyal brand, and future methods to leverage online and in-store shopping were an obvious consideration, Whole Foods has also been under intense pressure from private-equity firm Jana Partners. Whole Foods CEO John Mackey has been quoted as characterizing Jana as greedy. (Actually, he utilized a more direct term)

According to the release, Whole Foods will continue to operate under its current branding, and CEO Jim Mackey will stay-on as CEO.

News and social media reports further indicate that if the grocer receives a better acquisition offer, Whole Foods would be obligated to pay a $400 million termination fee to Amazon.

The other industry shockwave this week came from Kroger Company, one of the largest retail supermarket chains in the U.S., who issued unexpected lowered earnings forecast for the year. The aftermath of this news caused the chain’s stock to drop by 19 percent, the steepest one-day drop for the company’s stock in more than 17 years.

Kroger CEO Rodney McMullen is noted as sting the following in an interview:

The change right now in what the customer wants has never been faster.”

Business and general media reports are citing Nielsen and other retail sales data all indicating that consumers are both more price conscious in their food shopping, continue to seek out healthier food and beverage choices, and are increasingly turning to online channels for food and grocery needs. Nielsen data indicates that online grocery orders have risen 6.8 percent while visits to deep-discount chains are up 2.9 percent.

Other grocery retail chains are also feeling the effects of quickly changing  grocery shopping trends and the words, industry consolidation, are now coming to the forefront.

At the same time, discount grocery chains Aldi and Lidl are making a major expansion within the U.S. to take advantage of the current shopping trends, which will add to increased industry competition at the retail level.

What is now occurring in the retail channel will continue to cascade across consumer product goods, food and beverage supply chains in the form of tougher price negotiations and demands for increased product innovation addressing healthier food choices. The industry has already experienced the pressures from both Amazon and Wal-Mart as to which will receive the most attractive supply pricing deals.

As noted in our Supply Chain Matters industry commentary published in May, the industry winners are supply chain leaders who educate senior management on the differences of supply chain as a cost center vs. a business innovation enabler. They will also be those that can keep a laser focus on the end-goal, meeting and accommodating far different consumer preferences with changed thinking and distribution methods. By our lens, industry supply chains that invest in talent that can bring forward new creativity, collaboration and thinking for a supply chain model that leverages both online and in-store buying needs will likely benefit.

CPG suppliers are also subject to the influences of private equity, specifically 3G Capital, and no doubt, there will likely continue to be influences for additional M&A among major suppliers and food producers.

Consumer packed foods and associated industry supply chain teams need to pay very close attention to industry developments and associated implications. The notions of single-channel product demand forecasting or other business-as-usual supply chain planning and distribution methods no longer apply during now permanent industry shift. Agility, resilience, and a predictive understanding of consumer needs in food and food buying preferences are table stakes.

Be it noted that in June 2017, two industry shockwave developments became the catalyst for structural packaged and fresh food industry change.

Supply Chain Matters will continue to monitor industry supply chain developments and share insights. We predicted significant industry changes at the start of the year, and the clock speed has accelerated.

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.

 


A Commentary Reflecting on a CEO Change for General Electric

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General Electric made major business headlines today in announcing that Jeff Immelt will step down as CEO on August 1 after a 16-year run as the company’s chief executive officer.  The announcement was somewhat unexpected and came because of an ongoing CEO succession planning process overseen by GE’s board. None the lees, it was somewhat of a shock to many.

Supply Chain Matters views this announcement with some disappointment.

Succeeding Immelt is John Flannery, a 30-year veteran who has served the bulk of his GE career among the conglomerate’s financial businesses. Mr. Flannery’s most recent position was head of GE’s healthcare unit.

This senior leadership move comes amid a backdrop of increasing pressure from Wall Street and GE investors on a consistently lower stock price of the company’s shares during Immelt’s tenure. A further backdrop has been the presence of private equity ownership of the company’s stock, specifically Trian Fund Management to accelerate cost reductions and boost profits among GE’s core industrial businesses. In its reporting, The Wall Street Journal was quick to cite knowledgeable sources as indicating that Trian was not actively involved in the CEO succession process. We tend to believe otherwise. If not direct, certainly a major influencer to the culmination of today’s announcement.

As a blog focused on global supply chain management, we have consistently admired GE’s efforts both in the company’s global supply chain efforts and IT practices, but also in the vision and current unfolding strategies surrounding the GE Digital Manufacturing and Industrial Internet strategies. Under Immelt’s leadership, GE became to understand that digital disruption was a major threat as well as an opportunity. GE was bold in stating that factories no longer need to be sourced where labor is cheaper, but rather to best service major geographical markets. Instead, they can compete where educated workers can make the most of advanced technology, and where opportunities can be leveraged to shorten supply chains and reduce inventories. The company further understood the various tenets of supply chain risk and of supply chain risk mitigation. GE embraced the notions of Cloud-based ERP technology and was one of the early transformation adopters under the leadership of Immelt and GE’s CIO.

During the second term of the Obama Administration, Immelt served as an influential leader on the Presidential Commission on U.S. Manufacturing Competitiveness, adding an important voice both in words and corporate actions.

The notions of GE transforming itself from that of a traditional manufacturing focused company to a software-driven company were noteworthy and gutsy. CEO Immelt was by our lens, a visionary in understanding the implications of digital manufacturing both from an internal operations and external business perspective. We believe that GE will hence forth be recognized as a pathfinder in the notions of connected machines and Internet-of-Things enabled business models.

The bold decision to move corporate headquarters from a tranquil suburban Connecticut to Boston’s seaport district was to spur a campus environment of constant innovation and paranoia on market competitiveness.

In a call with investors, incoming CEO Flannery indicated he will take a fresh look at various GE businesses, establishing stronger shareholder returns as a goal of this broad review. Business media seems to be of the initial viewpoint that Flannery was chosen because of his financial industry experiences in creating value for shareholders.

In its reporting, the WSJ indicated that succession planning included consideration of both external and subsequently four internal executives including the CFO and heads of the power as well as oil and gas business units. As with all things GE, including the succession of former CEO Jack Welch, today’s announcement may serve as the prelude for other senior leadership or other organizational changes to come in the coming weeks and months. Their impact to ongoing initiatives, particularly the Digital Business and Industrial Internet initiatives is an open question.

It is indeed unfortunate that today’s Wall Street and investor environment remains one of a short-term focus and on individual reward.  Icons such as Dupont, Procter & Gamble and others must now constantly respond to such short-term thinking. Missing is a recollection that it took multiple years of internal investment and corporate-wide initiatives by Amazon to create the ultimate retail industry disruptor that the online provider and technology services provider is today. There again, Wall Street grumbled and grew impatient with near-term stockholder returns. Not so much today.

As a manufacturing and supply chain management social platform, we expressly tank Jeff Immelt for his visions, tenacity and understanding of manufacturing and supply chain needs, and that both truly matter in business outcomes.

We trust that John Flannery will take GE to its next dimension.

 

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.


Technology’s Impact on Industries Recognized as More Profound- Is the Supply Chain Prepared?

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A change is underway across many industry sectors, one that was profound implications for businesses and their associated supply chains. Investors are now realizing the threat of new digital based business models, and CEO’s are some of the recent casualties for businesses deemed to be laggard.  Supply Chain Matters submits that the added question is whether the supply chain is prepared. SCM 250 76 Technologys Impact on Industries Recognized as More Profound  Is the Supply Chain Prepared?

Over the past several days, The Wall Street Journal has published two opinion commentaries that reinforce a message that CEO’s must grasp the implications of technology on their businesses and on their industries like never before. The casualty list is growing.

The first profiles J. Crew CEO Mickey Drexler, (Paid subscription required) a fashion genius noted for building brands such as Banana Republic, Old Navy and Madewell. Drexler, who is further recognized for:” … redefining Gap in the 1990’s and transforming J. Crew into a household name, is now scrambling to keep the company he took private in a leveraged buyout from ending up in bankruptcy.” In this report, Mr. Drexler readily admits that he missed the biggest trend of all- “how quickly technology would change the retail industry.” The commentary goes on to observe that today, retail competitors with high-tech, data-driven supply chains can copy styles faster and move them into retail channels in a matter of weeks. Posed is the question: “Who would have predicted that in 2017 the No. 1 online retailer of clothing to millennials would be Amazon?”

A second WSJ commentary, CEO’s Must Grasp Tech Like Never Before, (Paid subscription also required) opens with the statement: “Investors and boards long obsessed with quarterly profits are now hunting for leaders to make big, fast bets to fend off upstarts shooting for the moon.” Observed is the recent sudden replacement of the CEO at Ford Motor, as well as other CEO’s whose companies have faced tech-heavy competitive disruptors within their industry. This commentary observes how some manufacturers and retailers are making big bets on disruptive, tech-driven businesses, protecting them as they develop and willing to absorb losses in the short-term.  The prime takeaway seems to be that today’s new business leaders are caught between the proverbial rock and hard place. While activist investors continually call for more short-term profitability and dividends, other investors are becoming more consumed with industry disruptors who are becoming more prevalent and visible. The theme is that CEO’s must possess the rare skills of being able to nurture new disruptive businesses while maintaining an existing business. One example provided is General Electric and its nurturing of its Digital Business unit. The commentary concludes with the observation that the advantage of bigger companies in this transition, is the manufacturing and supply chain infrastructure sufficient to deliver newer businesses and products globally.

Given the themes that regardless, the supply chain plays a critical enabling role, Supply Chain Matters feels compelled to add some other thoughts.

Industry supply chains are once again caught in the web of the need to continue to reduce overall value-chain costs, while at the same time, having the ability to nurture the required capabilities for digital transformation. From our specific lens, one of the most destructive forces underway in some industry settings is the zeal of zero-based budgeting techniques.

The same messages related to CEO’s and their ability to grasp tech trends and move toward new digital-based business models more quickly equally applies to senior supply chain leaders. That requires added investments in supply-chain wide process innovation, along with needed skills and augmented talent. To do this, supply chain leaders must be able to effectively communicate a dual-mission, one that can support ongoing needs for added productivity and costs-savings for existing traditional businesses, while investing in the new capabilities that will make digital based models more successful. In some cases, supply chain leaders will serve as a communicator and change agent for the broader senior management team.

Leaders can make such tradeoffs if they are willing to communicate and contract with the CFO and CEO on a parallel cost savings and investment plan.  As an example, for every dollar of cost savings achieved, a certain amount of such savings can be put aside for re-investment in required new capabilities in people, process, and technology. Likewise, senior management incentives and bonus plans must reflect parallel capabilities, that of building a new business while managing the needs of existing business.

Another equally important risk is one of complacency in timing.  One criticism that this independent analyst has of certain top-tier analyst firms is their tendency to context certain technology changes in rather long timing windows.

As an example, by 2025, eight years from today, a certain technology will become more mainstream in utilization. From my lens, such generalizations are a dis-service to industry leaders. Such predictions are much to generalist, serving to protect the brand or aura of the industry analyst firm in terms of prediction accuracy than to depict more boldness and detail related to a technology’s impact. A current example relates to Internet of Things (IoT) focused technologies and its impacts to traditional businesses. By our research lens, for some industries, the disruption brought about by new IoT driven business models will come sooner, rather than later, and despite current challenges in data security and standards.

Technology’s impact on businesses is indeed accelerating, and potentially more CEO’s will pay the price for not recognizing the timing, and for not moving the business fast enough to stay ahead of the challenge.  The same risks apply to supply chain leaders who opt for the conservative path of driving added cost savings regardless of external threats.

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.


Gartner Announces 2017 Top 25 Supply Chain Rankings

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Research advisory Gartner, Inc. released the findings from its annual Supply Chain Top 25 rankings this week, identifying its rankings of supply chain leaders and highlighting their best practices. As has been the practice, the rankings were unveiled at the Gartner Supply Chain Executive Conference, also held this week.

According to Gartner, three key capabilities stood out for the 2017 rankings:

Digitization of the Supply Chain– defined by creating digital connections within and across supply chain operations.

Adaptive Organizations and Capabilities– Defined as the ability of companies to be more adaptive to changes in their value-chains.

Developing and Fostering Healthy Ecosystems- defined as fostering the health and well-being of critical ecosystems including suppliers, partners, and employees.

Perennial supply chain leader Amazon joined Apple and Procter & Gamble in qualifying for Gartner’s “Masters’” category, which was introduced in 2015 to recognize sustained leadership over the last 10 years.

Unilever topped the 2017 ranking for the second consecutive year, followed by McDonald’s, Inditex, Cisco and H&M. Two new companies added this year were Nokia rejoining after a seven-year hiatus and Diageo making the list for the first time.

The surprises category would likely include Johnson & Johnson that climbed to #13 from being ranked #21 in 2016 likely based on a high three-year weighted return-on-assets and a high CSR Component Score. Other likely surprises would be Samsung Electronics that slid to the ranking of #25 from being ranked #8 in 2016. While the Peer Ranking deserved a higher ranking, the Gartner Opinion ranking appeared to be the lowest. We suspect that the three-year weighted revenue growth of negative 3.6 percent, and the Galaxy Note 7 product recall probably added to the low Gartner analyst ranking. Another surprise from our lens was Wal-Mart slipping again this year. Here again, the peer ranking came in high but not so for the other weighted rankings.

For the benefit of Supply Chain Matters readers, we have annually compiled the history of this ranking dating back to 2010, which is shown below.

 

GartnerTop25 sized 500 Gartner Announces 2017 Top 25 Supply Chain Rankings

 

Without risking the wrath of the Gartner content police, we would add some summarized observations, again from our admittedly more critical outside lens.

The same collection of names often come up each year. Of course, that may be a reflection that the best keep getting better, and we obviously applaud that fact. On the other hand, it may be a reflection other factors, including weighting criteria that may not depict whaTip Hat 263x300 Gartner Announces 2017 Top 25 Supply Chain Rankingst has the most meaning for industries, and more importantly, specific customers within such industries.  As an example, large consumer product goods producers and traditional brick and mortar retailers have been under enormous pressures to reduce cost structures and improve profitability, yet consumers are clearly making other choices in their buying activities. Pharmaceutical companies remain under an enormous looking glass in inflating prices of drugs and pharmaceuticals while shortages of critical life-saving drugs remain. Likewise, a more globally extended supply chain adds further supply chain risks.

Observations aside, we again extend our Supply Chain Matters tip-of-the hat to all this year’s named Supply Chain Top 25.

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.


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