“Companies should perhaps start thinking about measures to reduce their dependence on China or the USA.”
Schepers, who is responsible for network design in Europe. The network model comes in useful for studying not only market developments and new product introductions, but also geopolitical developments. “Take Brexit, for example. We have a big operation in the UK, but we also ship a lot of products over the UK’s borders. We’re currently investigating whether we can adapt our production network to limit this as much as possible – especially now a ‘no deal’ scenario is looking increasingly likely. This applies not only to beer, but also to the cider we produce in the UK. It’s not just about our primary products, either; Brexit could have major consequences for the supply of empty bottles too,” con- tinues Schepers. “That’s one difference with the traditional approach, in which every network study focuses on a clearly delineated question,” adds Waterman. “We now use the model much more often to assess the effects of macroeconomic or geopolitical developments and the asso- ciated risks. The outcome of Brexit will remain unclear until the very last minute, but analysing various scenarios helps us to avoid surprises.”
The network model provides the ‘fact base’, but that is not enough for guaran-
The Voldemort of logistics Eichhorn identified a major challenge for logistics service providers: “They still sell a service from a single distribution centre plus additional services such as express delivery. But customers need more flexibility on a bigger scale. Amazon is the Voldemort (Harry Potter’s arch enemy in the books and films of the same name, Ed.) of this industry. Amazon is increas- ingly acting as a logistics service provider to fulfil e-commerce orders. Amazon and Zalando are a mix of IT and logistics, with IT as their oil. The most important thing in their distribution strategy is population density. Returns remain the big problem for e-commerce.”
teed success. Winning internal support for the new approach is equally important, if not more so. The executive board of the operating companies concerned – led by the supply chain director – must have faith in the model and be willing to use the results as the basis for decision-ma- king. “And that can’t be taken for granted,” says Waterman, speaking from experi- ence. “First of all, it’s important to jointly set the ground rules to reach an ‘agreed one number’. Which data will be used as input? Which results will form the basis for our decisions? The fact that network issues are a fixed element in the regional S&OP process also helps in terms of win- ning support. There is regular discussion of the supply chain bottlenecks and of planned investment in things like produc- tion lines.”
Central development
Another key success factor is the decision to focus on the central development of network design expertise. “The operating companies were initially sceptical about that. Some of them would have preferred to have total ownership of the solution. But if the person behind that model sub- sequently leaves, you’re often left with an expensive tool and no knowledge. Deve- loping the expertise centrally is a much better way to safeguard continuity and quality. Everyone understands the bene-
fits of that now. Local supply chain direc- tors regularly ask for our help on issues, also because they know that it gives their investment proposals more clout so they are more likely to be approved.” Returning to the topic of Brexit, how does Heineken stay on top of these kinds of developments? Where does the bre- wing company get its input when ana- lysing the various Brexit scenarios? “At our head office in Amsterdam we have a Global Lead Brexit, who along with a steering group provides central support for Brexit-related issues. Besides that, the organizations in the relevant countries are themselves working on assessing the risks and taking preventative measures,” says Schepers. Heineken agrees that there is growing uncertainty in the world. ‘Prepare for the worst and hope for the best’, is the motto of Schepers and his team. “To give you another example, Turkey is an interesting glass supplier from a cost
perspective,
but we’re also considering a scenario in which Turkey is no longer in a position to export glass to us. A single tweet by Trump could be enough to undermine the trade relationship with that country,” states Schepers. “The growing uncertainty means that we’re increasingly opting for a network that is the most robust in every scenario and hence presents risk.”
the least
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SUPPLY CHAIN MOVEMENT, No.31, Q4 2018
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