Tackling beverage demand variability: An interview with Ed Koch, Former Global Director of Supply Chain Development at SABMiller
During his tenure at SABMiller, Ed Koch spearheaded a global operational excellence program to improve performance across 120+ sites and deliver $500 million in P&L benefits, and led an R&D program into the ‘Future of Work and Digitalization in Manufacturing’. He has global expertise in supply chain transformation, M&A support and lean operations management. In 2016, following the largest acquisition in UK history, he led the integration of AB InBev and SABMiller’s Supply Excellence Programs. Ed shared the following insights with us in a recent interview.
How are changing customer demands currently impacting beverage operations and their supply chains?
Consumer preference is for greater choice in both non-alcoholic and alcoholic beverages. New categories have opened up including ready-to-drink coffee, non-alcoholic/low-alcoholic beer and wine. In developed countries, there has been a significant drive to premiumization to build categories with greater value. In the developing world, affordability is a priority and has led to products utilizing new crops and ingredients.
For beverage supply chains, this product proliferation has step-changed levels of complexity from working with new and existing suppliers to develop new ingredients, managing raw and packaging materials, and increasing pressure on production facilities. This has shifted the focus from quality excellence and ‘efficiency at all costs’ to increasingly smaller batch sizes and product runs. Supply chains are responding to this complexity through sophisticated planning, warehouse and transportation management. Complexity is also a breeding ground for mistakes and manufacturers require far more robust processes to ensure quality excellence and product safety, and to eliminate costly waste.
Finally, the vital focus on sustainability has introduced new packaging materials and a sharper emphasis on use of resources.
Of course, the current COVID-19 pandemic is placing new, never-seen before pressures on beverage supply chains. Demand in on-trade has almost ground to a halt while off-trade demand has significantly increased as countries go into lockdown. This has had a dramatic impact on product mix with an associated knock-on effect in supply chains. Coupled with this, manufacturers must institute social distancing measures in their operations to prevent employees coming into close contact with each other. As always in incredibly tough times, we are seeing novel solutions being developed whereby shifts are segregated, lines are partitioned from each other and there is no overlap between incoming and outgoing shifts.
How can beverage organizations leverage operational excellence to drive ROI in this changing landscape?
In this environment, having highly skilled and capable people who are able to solve new problems quickly is vital. Ensuring that these teams work guided by rigorous process and standard work ensures that there will be consistent levels of quality and output. This level of capable people typically keeps identifying new ways to add value to the operation – whether it be increasing capacity, improving performance, or innovating both products and process.
The only proven way to build this internal capability is with a focused operational excellence program that integrates people, processes and performance. This starts with establishing a clear plan of what needs to be delivered, then aligning an improvement program to develop people and the ways of working (processes) to meet these objectives. The TRACC maturity-based improvement program which is based on time-tested lean principles is the ideal way to establish a continuous improvement capability within your operation.
During the COVID-19 crisis with so many unknown factors, managing a beverage supply chain is very challenging. Operational excellence practices can add speed to your daily routines and value to your emergency planning and preparedness. This may include assessing and resolving critical capacity constraints, rapid implementation of daily management systems to ensure visualization and fast decision-making, and standardization of practices and routines to ensure rapid replication and adoption through the business. Above all, clear leadership and coaching of staff is paramount through these uncertain times.
What other advice would you give to beverage leaders navigating the changing landscape?
Running an effective beverage supply chain is a ‘team sport’. Typically, the largest number of people working for a business do so in the supply chain. Engaging leadership that unlocks the full potential of individuals is vital to the success of any operation in any climate. Leaders set the tone and provide permission for people to contribute, engage and master their own areas of responsibility. So, the importance of strong and effective leadership through a continuous improvement transformation cannot be under-estimated.
What can organizations do to ensure they are positively impacting the communities and environment within which they operate?
First and foremost, the most powerful way businesses impact their communities is by running their business very, very successfully. This creates jobs and tax revenue which, in turn, ensures the community is able to prosper and enjoy the essential services it needs. Additionally, it makes the suppliers and customers of the organization grow successfully and, in turn, provide work for their communities.
A second critical role that businesses can play is providing leadership in environmental sustainability. Wise use of resources, re-investing in resources that communities need, educating people on sustainable impact, and influencing their stakeholders positively are all ways that a business can have a positive impact on the environment. Again, this is an area that provides great opportunities for people to contribute their ideas, time and effort.