We’re currently counting down the top 25 supply chain performers to share their success and provide advanced lessons for the community. Gartner is in the business of supporting companies to manage their supply chain to improve efficiencies and reduce costs – and our analysts have used their expertise to create our top 25 list.
Last time, we looked at the success of British American Tobacco and Coca-Cola Company, which both manage their supply chains excellently. This article will focus on the number 17 and 16 positions in our list, Diageo and Lenovo, respectively – two more unique and innovative companies breaking ground with their supply chains.
Diageo, the British alcohol beverage company, operates across 180 countries and uses over 140 production sites worldwide. Diageo produces many of the most common drinks, such as Guinness, Johnnie Walker, and Smirnoff – and in the world of alcohol, demand fluctuates following yearly occasions.
Synchronized With Consumers
The fluctuation in alcohol demand is why Diageo supply chain leaders aimed to establish a system synchronized with their customers’ behaviors around the world – one that is depletion-driven to optimize production volume and profitability. Additionally, many of their products have expiration dates, so an oversupply causes wastage, reducing their profitability and sustainability.
Diageo implemented end-to-end, depletion-driven supply chain operations, working backward from the consumer through to production. As you can imagine, their manufacturing partners weren’t thrilled with the idea as it meant they had less control and planning time over the quantity of production. This highlights the success theme of strong leadership, as the process is highly valuable and has helped Diageo improve their bottom line, even though it wasn’t a favored decision.
Accurate data that could provide transparency was crucial to implementing their plan, which meant transforming the quality of their data to an impressive accuracy. To do this, Diageo has to develop innovative procedures, incentives, and systems that reflect customers’ consumption. They used promotions to increase communication with customers and technology that helped them process the insights gathered.
Global Supply Structure
Diageo restructured their supply chain from a global management system to one with multiple supply centers, where the different markets took responsibility for their regional supply chains. This meant that their suppliers worldwide wouldn’t have to go through local organizations, who then go to the supply chain leaders but could go directly to the manager of that region.
This restructuring meant that the people who made decisions work closely with the team and have more visibility for the process, and these supply centers were given more control and spend capacity to manage their category team. The global category team is still managed at their headquarters, but their decisions focus on big picture aspects that require less visibility.
The multinational technology leader, Lenovo, implemented a comprehensive three-part transformation to their supply chain to create a highly synchronized system, outlined below.
- A new direct shipment program allowing partners to meet demand quickly
- An innovative capability that enables customers to buy products mid shipment
- Incorporating a touch-less order processing system
Direct Ship Enablement
Using a carefully balanced combination of in-house production facilities and outsourced partners allowed Lenovo the ultimate supply chain flexibility. Through this delicate mix they could provide direct ship and create agility while remaining cost-effective and mitigating associated market volatility risks.
Direct shipping transformed their entire business by becoming more customer-focused, improving supply chain visibility, and lowering costs. The decision to make this change came about from analyzing the impact of receiving finished goods from manufacturers and then shipping to customers against shipping products directly from their partners.
Their findings outlined that it would be highly advantageous to deliver directly and cut out each link in the supply chain, eliminating an additional stocking point and decreasing expenses and lead times.
Managing the Outsource
After employing the direct ship program, Lenovo sampled a group of manufacturing partners to assess the decision. While the impact was incredibly positive, the challenge was how to manage the outsourcing partners to ensure their performance met Lenovo’s needs. To overcome this challenge, they incorporated automatically generated reports and purchasing information that was updated daily by their manufacturers.
This significantly improved the visibility they had over their supply chain all the way through from delivery to the customer’s local dock. Lenovo can manage the communications between their manufacturers, carriers, and customer purchases to enhance a smooth operation. Working with many different partners and suppliers, Lenovo had to install processes that maintain the confidentiality of volume pricing arrangements. So while their partners had complete visibility of approved suppliers, Lenovo can control the replenishment from the suppliers on behalf of their partners – allowing them to maintain control of quality and expenses.
Improved Customer Orders
Lenovo has become a significant technology competitor due to its proactive ethos of creating optimal customer experiences and developing a supply chain that supports that. The third Lenovo supply chain transformation involved enabling a touch-less ordering system, which meant that customers had no manual intervention while placing their orders. By creating a robust, comprehensive platform to facilitate the touch-less ordering process, they’ve just about eliminated dead-ends that stop customers from purchasing items and enhance their customer experience.
Comprehensive supply chain transformations, like Lenovo has showcased perfectly, are an ideal way to enhance the system’s complexities and reduce its vulnerabilities for effective supply chain management.