Danone Nutricia, supply chains and the VUCA world
In the supply chain world, the well-known acronym ‘VUCA’ – volatility, uncertainty, complexity and ambiguity – has never been more relevant than it is today. The geopolitical landscape is evolving on an international scale, while as Brexit unfolds in the UK and EU, it’s hard to gauge what’s going to happen in either the near or long-term future. The 4th industrial revolution is taking hold, transforming the nature and pace of our working environment and processes. And we’re seeing an increasing number of disruptor businesses that are changing traditional supply chain models and relationships.
The industry’s go-to approach of using the past to predict the future through statistical modelling and forecasting isn’t as accurate as it used to be. At the same time, business and consumer expectations are changing; stakeholders across the wider production and distribution supply chain want things to happen more quickly and efficiently than ever before, and there is little room for failure.
In short, the markers around how we operate are moving – and it’s putting our function under increasing pressure. Initiative and innovation are now essential for businesses to meet these challenges and evolve their commercial strategies in line with the new operational landscape.
This is particularly important in today’s digital era. Social media allows opportunities and risks to be shared across regions and time zones. Consumers and stakeholders can therefore see and react to changing circumstances within seconds. As much as possible, we need to be ready to deal with their reactions, and make sure they are aware of the changing world. It’s about managing expectations. There should of course be a continual focus on developing new ways of working that allow you to maintain service levels and keep up with the pace of change. However, there should also be clear communication around how changing trends and seasonality are affecting the business, to help ease pressure.
It’s also important to encourage a sense of reason. It’s about accepting that even the most advanced new forecasting methods won’t provide the same level of accuracy as we could give in a more stable context. Instead, businesses should adjust their strategy – focusing less on the relative importance we place on forecasting as a skill, and more on the tools you have within your business to help deal with the consequences of unpredictability.
At Danone Nutricia, we very much see our people and teams as our vital asset. Working on the frontline, our supply chain team are the crucial connectors between our business strategy and objectives, and the outside world. They’re often the first to see the changes coming on the horizon and we have a responsibility to equip them with the skills they need to take the initiative and flex our business models to accommodate the evolving landscape around us.
One way we do this is by ensuring our supply chain function is plugged into and driving all the business’ key decision-making processes, with a direct line of communication to senior business leaders. This gives us the transparency, insight and access to truly understand our business’ objectives and enables us to be more agile whenever we sense that the company’s direction of travel is off-target.
But at the heart of empowering our response to greater volatility in the day-to-day of supply chain management is our core purpose – to help babies get the right nutrition in early life, to support positive health outcomes for a lifetime. It’s the mission which drives everything we do across our business, and something that all of our people are fully engaged in. Each and every Danoner in the supply chain function, from analytics to logistics, understands why it’s important to not just our business success, but our consumers and the wider public health agenda too. They’re committed to delivering an efficient and dynamic supply chain because they understand how what they do relates to our bigger dual company commitment to delivering commercial success alongside social progress. And, critically, this knowledge gives them the confidence to make sound judgements on the strategic priorities and actions that will help us flex around the outside world, to meet our objectives and be successful while purpose-fit.
It’s an approach that comes into its own as we face some of our greatest supply chain challenges, such as globalisation. As with many industries, our consumers’ shopping habits are changing, and demand is coming from unexpected areas. During recent years, we have seen more and more secondary unofficial sources buying in one location but selling in another region; demand and supply forecasting has become increasingly difficult as a result. Yet having our supply chain team so closely involved in our business strategy in the context of our mission means we’ve been able to identify the specific risk areas where negative impact could hit, and re-route our entire plan around this issue to help protect our reputation and performance.
In a very tangible way, making such strategic operational decisions in the supply chain becomes a much easier process when you are guided by a clear business purpose. For us, we understand that enabling continued company growth in the market also enables continued expansion and progression of the positive impact we can have on nourishing early lives. We are maintaining supply of our products to ensure that we are there to support parents and their little ones.
Whether your business is big or small, global or local, the importance of the supply chain team in navigating a VUCA world can’t be underestimated. The pace at which external factors are changing ways of working is not going to slow down. While our processes and methods have to adapt in line with the context we’re operating in, it’s the people within your supply chain function who will make sure any changes are both business and mission-fit. Engaging your people and knowing how to empower them with the knowledge and tools needed to play their role effectively should be a top focus.
After all, with growth in the competitive FMCG market becoming ever-harder to find, a supply chain team that understands your business objectives and purpose can only help to overcome external challenges. Such a team is also important to help identify and unlock new opportunities for commercial development that could be the key to helping your business get ahead.
By Mark Broxton, Supply Chain & Quality Director at Danone Nutricia Early Life Nutrition