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Rick D. Blasgen is vice president-supply chain for Nabisco Inc., one of the world's largest manufacturers of biscuits, snacks and premium grocery products. The Parsippany, N.J.-based company produces some of the best-known brands in the U.S., including Oreo, SnackWell's and Chips Ahoy cookies; Ritz crackers; A1 steak sauce; Grey Poupon mustard; LifeSavers candy; and Planters nuts and snacks. Oreo, Ritz and Chips Ahoy are global brands as Nabisco markets them in many of the more than 85 countries in which it operates. The company has a number of familiar international brands as well, including Yemina pastas, Royal dessert mixes and Fleischmann's yeast. Nabisco is in the process of being acquired by Philip Morris.
Q. It looks as if Nabisco will be going through another transition of ownership here soon with the pending purchase by Philip Morris. How does this type of transition impact supply-chain operations and how do you plan for it?
A. I can't give you too much information because the deal hasn't closed yet. But I can tell you that when you take a $9bn company, which is what we are, and connect it with a $24bn company to create a $33bn company, you end up with a lot of opportunities for synergies and for connecting supply chains and various channels of distribution. That is what we are looking at - how do you go to market with this new and exciting portfolio?
Q. Do you think this will be the greatest challenge for your supply-chain operations in the coming year?
A. I think our greatest challenge will be satisfying the needs of an ever-changing customer base, because within the various categories and classes of trade in which we compete we have many, many changes and dynamics going on. These range from massive consolidation to technology improvements and the use of technology to better enable the supply chain and link up key participants. And also, in our case, we have a variety of products that compete in many different categories, all of which have varying requirements.
And we are very focused on the customer. So the question becomes how to design a supply chain that satisfies the needs of your customers, but yet delivers the different expectations of these varying classes of trade at the total lowest landed cost. That is my whole world. I sum it up this way: My job should be to satisfy or exceed the needs of our customers in the classes of trade in which we participate at the lowest total delivered cost.
Q. Can you point to a particular initiative that you will be focused on in the near future to achieve that goal?
A. The core thing is to understand the customer base and its changes. Currently we have a significant food service portfolio, a significant confections portfolio and a grocery portfolio, and we have customers who are beginning to span those three major distribution channels. So how do we connect our internal supply chain to deliver against the needs of these customers and their ever-changing customer base? It's about a go-to-market strategy that couples our supply-chain capabilities with a sales and marketing plan, in order to deliver against that plan. It's about being flexible and nimble like never before. And doing it, by the way, in a supply-chain scenario that has issues like a constrained labor market, which is having a huge impact on warehousing and transportation.
The transportation industry is continuing to go through problems with driver retention, which hits the common denominator. We all still have to have roads and trucks - that's the common way we move product. And we all are trying to increase the velocity of inventory and also of information throughout the supply chain. So we have to figure out ways to do that with infrastructure dynamics like driver retention and labor markets that are really tough.
Q. What is the weakest link in the supply chain.
A. I think it is labor related - at all levels. When I make a presentation, I always say what a wonderful time this is to be in logistics and supply-chain management. The opportunities for supply-chain executives and managers or directors - whatever the level - is greater than ever before. So your associates are highly marketable. This means that not only is it more difficult to retain top talent and grow that talent into senior leaders in an organization, but you are consistently and constantly recruiting. In addition, in most progressive companies, the field of logistics has made its way to the boardroom. Logistics is no longer seen as a liability to be managed but as a competitive weapon in the marketplace.
I see this when I go to visit customers. I ask them how they decide which product to carry if there are two competing products and they can only carry one, and invariably the answers I get are supply related. They want the manufacturer who is always there supporting their purchase order, who delivers on time, who invoices them accurately and ships damage-free product, and who helps them become more profitable in their retail operations. Those are supply-chain related ideas. It all really comes down to one supply chain battling against another supply chain.
Q. Does greater boardroom visibility bring with it new expectations for the supply-chain to contribute to the top line as well as impacting the bottom line through cost containment?
A. Yes. Part of my job is to sell the value of supply-chain management to our company, and I always tell people that an effective supply-chain organization or logistics organization can generate revenue. How do you do that? Well, if you satisfy the needs of your customers and consistently deliver high-value within the supply chain, they will likely be there for you the next time there is a special feature or buying opportunity for an event or a seasonal product. That is one way.
Costs are still important, and you still have to figure out ways to become more productive and take costs out of the system. There is still redundancy and waste that exists in the food distribution supply chain in this country and there are always ways to partner better and eliminate those costs.
Q. Nabisco participated in several of the early pilot projects for Collaborative Planning, Forecasting and Replenishment (CPFR). Do you think CPFR is living up to its potential? Where is Nabisco going with that initiative?
A. Yes, I do think that the early pilots were successful. They proved that the process of collaborating can work. We had dramatic results in the pilots and I do believe it is the way of the future. Collaboration needs to occur on multiple levels, not just with two-way standard interactive systems, but working more deeply with your trading partners to take costs out and improve the velocity of inventory and information in the supply chain. The same philosophy can work, by the way, between manufacturers and suppliers.
But with regard to CPFR between manufacturers and retailers or wholesalers, I do think the technology has to improve so that you can have a scaleable process. For example, Wegmans, which participated in one of our successful pilots, can't have a computer just for Nabisco and another for General Mills and another one for whomever. They need a commodity technology that allows them to interact with multiple manufacturers through the same standards. It needs to be scaleable. It is great to do CPFR with one product line, but how do you use that same process with a company that operates across many, many different categories and has different buyers in the retailer? We have to get to a scaleable process.
Q. What are some solutions to the scalability problem?
A. I think it partly is making better use of the technology we have. We already have a lot of technology and I wonder if we need any more. But, as an example, we had all these supposed standards that existed years ago around EDI, and then everybody twisted their own DNA into that standard and the next thing you know you had a lot of standards that were not standard. Now everything is web-enabled and out technology is very robust. But it still comes down to that issue of collaboration - partners willing to exchange critical information and willing to understand each other's role within the supply chain so as to benefit both partners. It comes down to face-to-face discussions that address things like what are the rules and the responsibilities of each key participant? What are the incentives? What are the rewards? And how are we going to enable our folks to be able to effectively work in an environment that takes them outside of the four walls of our company. The technology is certainly there to support it and we probably are not using that technology to as high a degree as we should.
Q. Is that because of an unwillingness to share the information, a lack of trust?
A. I know people say that all the time, but I don't think it's so much a lack of trust, although in some ways that lack does exist between some trading partners. I think it is due more to people having so much activity going on in these companies. I can hardly think of a manufacturer that is not going through a consolidation. You have us, you have General Mills and Pillsbury, you have Best Foods and Unilever and many more. And you have customers going through the same thing. It has been this way for a year or so among manufacturers, longer among retailers. So people are wrapped up in their own internal workings of redesigning their company. You have people out there trying to just execute the business, let alone put together the greatest supply chain against a list of very complex issues. This factor is underestimated.
I think people are much more open and trusting of one another now than ever before. It is just that they go back to the office and the next thing you know they are divesting this product line or integrating that one and the dynamics of these different categories and classes of trade are upon everybody. It is just a very internally focused time.
I know we meet with our partners and talk about how great it would be to have more effective use of our assets. They have trucks, we have trucks, yet we still have trucks that are running empty. Why is that? Well it is because we don't have the opportunity and the time in which to share critical information to move freight together.
Q. I believe Nabisco has worked with Nistevo on some of these issues. Is the exchange approach part of the answer?
A. I think it is a facet of it. Nistevo provides the ability for key participants in the supply chain to better use their assets. In other words, if you have a set of core carriers and a set of manufacturers willing to use those core carriers, you will reduce the number of empty miles that those carriers need to run. You share in the benefits by virtue of lower rates and more productive relationships with your carriers. The carriers benefit because the fewer empty miles they run the more effective they are at moving freight, particularly with the driver retention issue that I mentioned earlier. This is an area where an exchange or a facilitator can certainly work to our benefit.
Q. Nabisco has a lot of great brands. When managing the supply chain, do you think in terms of brands and how the supply chain can help build global brands?
A. Absolutely. Our vision is to build total brand value by satisfying our consumers and customers faster, better and more completely than the competition. If you think about faster, better and more completely, and you convert those notions to supply-chain management and logistics, they hit home big time. At Nabisco, we have a great relationship with our marketing and sales counterparts, though this wasn't always the case. We have a very formal sales and operations planning process and those guys are diligent about attending the meetings. If we need something they are there for us and if they need something we are there for them. We understand the role that they play and they understand what we can do for them with regard to effectively moving product rapidly. Think about new product introductions - it takes way too long in this country for the supply chain to get a new product out to market. We are trying to increase our speed to market all the time and a lot of that has to do with supply-chain capabilities.
Q. What are the greatest challenges in terms of your global supply chain?
A. The challenges are information based and infrastructure based. The infrastructure we enjoy here we take for granted. Think about electronic data interchange. There are countries where EDI is very difficult. Go down to Mexico and you see everybody with a cell phone. So, it is very difficult to just take the magnitude and volume of electronic data interchange that we have here and pop that into other countries that may not have that infrastructure.
I think we can learn a lot from each other. For example, I think truckload transportation as it exists here will become more common in other parts of the globe as trade barriers come down. In Europe, transportation consolidation has been in place for many years and they operate with a lot fewer SKUs than we do here, so we have additional complexity because of our desire to provide consumer choice. So there are a lot of best practices that can be learned from different parts of the globe.
Q. What are the most critical skills for a supply-chain manager today?
A. The critical skills from a leadership standpoint are persistence, perseverance, performance and passion - my four Ps. You can stand here all day and say, "seamless, fluid supply-chain integration focusing on satisfying the needs of the customer at the lowest total delivered cost." But if you say that to a president who might be more of a marketing person or a general manager, he'll just look at you. He will have no idea what you just said. Somehow you have got to relate the capabilities and values of an effective supply chain to the folks in your company who don't fully understand the issues. To them supply-chain management may just be about moving boxes. You have to take all the jargon that we so aptly use in logistics and supply-chain management - MRP, ERP, DRP and all the other acronyms - and make it understandable for someone who doesn't deal in that world.
So you have to be a person or a leader who has a significant level of passion for your business and a significant ability to understand that folks are not going to buy into this right away. You have to financially show them. You have to point out that $1 saved in inventory improves cash flow by $1. What level of incremental sales does it take to generate that same dollar in a grocery marketplace that may only grow 1 percent to 2 percent a year? Nobody has growth targets of 1 percent to 2 percent.
Q. In your career, what has been your most significant learning?
A. It is that if you consistently apply the notion that a supply chain and logistics organization can add value, you will, in fact, reach an oasis. There may well be a parched desert between where your are and that oasis, but you can get there. You have to consistently perform and if you do that consistently, along the way your organization will gain enormous credibility and integrity within the company. As long as you can continue to involve key participants and key constituents in what you are trying to do and the value that you bring, they will respond.
But don't underestimate the amount of time it might take to get there. You have to be consistent and you can't waver when folks may not agree or may not understand or may not get on board.
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