Leaders in Supply Chain and Logistics with Radu Palamariu

#49: Vikram Agarwal Chief Supply Chain Officer of Avon

July 23, 2019 Season 1 Episode 49
Leaders in Supply Chain and Logistics with Radu Palamariu
#49: Vikram Agarwal Chief Supply Chain Officer of Avon
Chapters
Leaders in Supply Chain and Logistics with Radu Palamariu
#49: Vikram Agarwal Chief Supply Chain Officer of Avon
Jul 23, 2019 Season 1 Episode 49
Radu Palamariu
Vikram is a seasoned supply chain professional with a career spanning 30 years in the industry.
Show Notes Transcript

Vikram is a seasoned supply chain professional with a career spanning 30 years in the industry. He is responsible for leading the continued roll-out of Avon’s new Supply Chain transformation plan, aimed at delivering improved service and significant savings to fuel company growth.

Discover more details here.

Some of the highlights of the episode:

  • The difference between direct selling and FMCG supply chains
  • How Avon successfully reduced its total number of SKU by 35%
  • Reducing inventory by 20% while improving service to 800 basis points
  • Differences between Avon supply chains in different parts of the world
  • How Avon transformed from one-day delivery to one-hour delivery in certain markets
  • Global trends shaping supply chains in different parts of the world
  • Gender diversity in the organization and generating better livelihood for women.


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Speaker 1:
0:00
Hello and welcome to the leaders in supply chain podcast. I'm your host Rapala Mario, managing director of ELCA Global. Our mission is to connect the supply chain ecosystem globally by bringing forward the most interesting leaders in the industry. And it's my pleasure to have with us today, Bikram Agarwal, who is the president, the chief supply chain officer of Avon. Bikram is a seasoned supply chain professional with a career spending 30 years in the industry. He is responsible for leading the continued rollout of evens new supply chain transformation plan aimed at delivering improved service and significant savings to fuel the company's growth. Since joining Avon in early 2019, Vikrum has successfully overhauled the company's customer and representative proposition service offering functional processes and cost management. This part of the business touches more than 10,000 associates in the supply chain function as well as evens footprint of uh, in more than 50 countries globally, eight manufacturing sites and 50 distribution centers be crim joint even from Unilever where he served as executive vice presidents, ply chain Africa and was responsible for a multi billion dollar regional business including end to end supply chain across 15 countries, 14 factories and 25,000 employees. And prior to this he was also group vice president of global home care supply chain at in liver where he was responsible for direct business planning with country and regional leadership. The crumb, thank you for taking the time and joining us today.
Speaker 2:
1:25
Thank you. Glad to be here.
Speaker 1:
1:27
Super. Um, so let's start a little bit, you know, a little bit in terms of the Business Monaco's even obviously is quite a different type of a business. You have 10,000 associates that basically help you sell and distribute your products. Um, how is managing Avon supply chain operations different in disrespect from Unilever and how is it similar? Maybe let's start there.
Speaker 2:
1:51
Signing. The first thing is that if I just step back and look at uh, conceptually at how everyone is organized compared to other consumer goods or maybe beauty products companies is that the channel is largely owned by us through our representatives who are not our associates, but certainly they represent us. And that's a false of if you like millions of sales people in our sales force around the world. So on one hand we a channel owner, like the retailers, maybe on the other hand we had a branded goods company, like any other beauty rendered goods company maybe. So I think the unique thing about Avon, it brings this front end and the back end together in a sort of convergent model, which if you look at it, very few companies around the world are in that space. Either you find the retail retailers or you find the FMCG companies as you said, but very few who are encompassing involved.
Speaker 2:
2:53
Now that brings in the supply chain its own challenges because that customer base of millions of preps data is also always journeying. Unlike a FMCG company where you can see that the customer base is largely static. So when you look at this as an example at forecasting, it adds another variable in the forecasting process, which is about the number of representatives you have in a particular area or region or city or country and you to factor that in as you plan to give your service because that becomes a very important input variable into your demand forecasting. In addition, this is not about serving the warehouses of a large modern trade retailer in Europe. This is about making the boxes reach people's homes. So this is about making sure that each one of the millions of representatives when they place an order in a campaign and a campaign typically last three weeks.
Speaker 2:
3:53
So every campaign, every three weeks, your what millions of representatives around the world placing their orders of maybe $20 $30 $40 equivalent consisting of 20 to 30 units. And each box has to be absolutely perfect in terms of the accuracy of the items that they have ordered and the address to which it is delivered. And on the time it is delivered. So in essence, Avon is around delivering boxes to the customer's homes. There is any other large FMCG company would be about delivering our truck or part of our truck to a customer. And that's what really brings the complexity. Bedrock shifts the know it won't supply chain operation to really the pick and pack operations that we have rather than any of the backend operations. If you don't get that one right, this sort of our business can never succeed. And why say, well sir, if you can get that right, then that is what you can really build as a competitive advantage. So really, I believe that the operative advantage on the model of this company is our ability to deliver that box accurately to the customer again and again, every three weeks in every part of the world.
Speaker 1:
5:15
And obviously the brand has been there for 130 years. So, um, yeah, for sure, for sure. There's a, there's a high level of success. Um, and I wanted to bring the discussion a little bit to the transformation project that you've been having for the last, uh, for the last couple of, uh, all the for the last couple of months in, in this, I think it started last year with the open up strategy and the focus on digital transformation and you picked it up when you join on the 22,000 and um, um, 2019. Um, and you started with Avon, but I was curious because digital transformation is kind of like the buzz word, right? There used to be, it still is, but you already seeing some results and some notable projects coming to fruition with enabled. And maybe you can give us an example too in terms of specifically in the supply chain world, what you've done and what are some of the results that you are you're getting?
Speaker 2:
6:08
Yeah, so I think the first thing which we identified needs to be done is I would put it loosely under the banner of simplification, making ourselves simpler and leaner. Now what that means is I think we have worked far too many as could use. We had too many skews. We have reduced about quantified percent of our SKU count in the last uh, since the beginning of this year. But I think we still have too many and we have got a large way to go are there. And the reason for that is once again, the business model we have around one third of our rescues being gender around every year as newness or innovations. Now you need to be careful that when you're doing that kind of an intuition germ that you have an absolute religion around one in one out. Otherwise you can make your portfolio absolutely too complex for anybody to comprehend on the sales side as to what they should sell.
Speaker 2:
7:07
And so the first part is around simplifying our portfolio, reducing at SKU count. As I said that we have successfully reduced it by about 35% in the past eight months. The second one is around making the whole supply chain much leaner. And as soon as me and my colleagues think of a lean supply chain, the first thing we are, where our mind goes is inventory more than mentally. You have less, more of a lag. Do you have an introducing units? Because you've got a pipeline over there that you need to exhaust before anything you can come in and more the rescue run of herding the P and l too, right? All same Sean. So I think the first thing which one does, in order to make the supply chain more region is to bring the inventory onto a level which is optimum. It can still drive service.
Speaker 2:
7:59
And at the same time it, it's a, it's something which is fast moving. The trick is not about having a large inventory. The trick is about having the right inventory. So in the past money, and also we have managed to reduce our inventory by around 20% of where it was. But at the same time, we've also improved our service by almost 800 basis points. So really the mid, that larger inventory means better service. There's not really span, right? In wintery meats means better service rather than a large inventory. So that's the second part of simplification. And the third part of simplification again in the supply chain is about having the lead footprint. Yeah. What needs to be absolutely sure that which are the assets in the supply chain, which has strategic merit either on account of the geography, the country, where they located or the technology or the skin, whatever the criteria may be.
Speaker 2:
9:01
But one needs to constantly keep evaluating what is really strategic in terms of the competitive edge, which your supply chain has and what is non strategic. And constantly there needs to be a process of simplifying this and keeping for yourself what is really important and letting others do what is not so strategic. Yeah. And there are enough high class service for why doesn't the world beat contract manufacturers meet planning experts so on who can do the job for you in as appreciative manner as you can, as long as you're not dealing with proprietary technology or geographical strategic advantage. So that's about simplification. I think. Uh, besides that, if I just zoom back to the open up strategy, it is also about, I, I would call it very simply the making sure everything is available everywhere. And every time who are consumer when she wants it.
Speaker 2:
10:04
Now, when I say every time, an example of this is that we have always operated on what we call a meal plan, which means the representative can order only once during a different campaign of three weeks and that order will be delivered. Now we have been working on, I'm constraining that and we've been saying that you can order it anytime. So you don't need to just place an order once in a campaign on a particular day or a particular week or anytime. And we will deliver any time. And in fact, we have increased our, what we call out of meal plan excess by uh, by 50%. It's gone up by one and a half times to where it stood in 2018. The second part is everywhere. And this is about saying that we will deliver to the last consumer in her home if she wants it in a number of days. There's two sales leaders who wanted to deliver themselves or their representatives wanted to be delivered fine, but we need to give that optionality to the customer that how does she want the delivery to happen?
Speaker 2:
11:08
And I'll come back on back why I'm saying that, why that is so important. But let me finish with the third one, which is everything. Now in a portfolio which is as complex with a huge number of escape scales, it is important that as far as the customer is concerned, every box she receives is complete. So we call her chart. And what we have successfully launched, definitely we call it a war on shorts, is that we may be saying that there is only one SKU out of 4,000 in a given country, which is run short. But try telling that to a representative was received one shark out of 12 items which he had ordered. So I think it's, it's very important that we get this right and we deliver every single item in time. No different than the type of district principals or what we call in service as on time in full.
Speaker 2:
12:01
Essentially it's a exploded version of that because we are dealing directly with so many customers. So that's what I would have in terms of how we are opening up strategy. Maybe just one more point is that it's a, in addition, and maybe it fits in here as a part of every wave, is that we are now starting to develop business models for delivering to the customers. Even in countries where we do not have our direct selling presence, meaning we do not have reps in that country, but still we have customers who are interested in getting up products because there is a very strong brand awareness or maybe because historically they won't use to do business in that country. So we are evolving business models to really make sure that this sort of an offshore trade can still help us make our products reach those customers.
Speaker 2:
12:54
I said I will come down, come back to uh, everywhere and about Mick making the deliveries to the customers directly at their choice. At the heart of that is an intent to make sure that our representatives are not very carriers of boxes. They're not curious. They're really beauty advisors. We want to value add to the proposition of the representative where HUD role is not just about ordering a box on, on behalf of customers as delivering a box to her. And then she can bring the individual items to the customers who had ordered in the first place. We can do that. We can do that more effectively than and more effortlessly than her. So therefore why make the representative fluid? And if she so chooses, we would be happy to deliver the box to her customers rather than to her. So that the, the, the Legwork, the physical effort out of that is taken out and she focuses more on Vegan beauty advisor, properly trained as a consultant, if you like, who could and tell people which products are good for them. And how, so really that's next to me from a supply chain lens is what open up means. Yep. Simplify and then deliver everything everywhere every time.
Speaker 1:
14:15
Mm. No, but it's a huge, uh, it's a huge shift and it's, it's one, it's paradigm shift. The second, the second part is obviously if the representative no longer has to or it has the option of not delivering, I think it takes a lot of hassle away. Uh, at the same time. That's a huge challenge for, you know, for, for the supply chain or even to, to implement. And I imagine that you've gone through through quite a bit of, of, um, challenges to get there and I'm, I'm sure that you're probably still in the journey and I wanted to touch a little bit also on the ever increasing expectations of customers of the end customer that the delivery gets to them faster and faster, right? Because in the ecommerce world you have next day you have one hour, you have benchmarks that are getting smaller and smaller, driven by Amazon and, and all the, you know, Alibabas of the world. How do you, and what's your kind of, you know, a benchmark as I was well as strategy, right? In terms of fulfillment last mile, to keep pushing those, you know, the envelope faster and faster to make sure that your, uh, clients and customers get the products fast.
Speaker 2:
15:20
Yeah, I think the first thing is, you rightly called it out is that the expectation of the customer today is that they're, uh, if she places an order online literacy, then the, then the, the, the SKU, the product should be reaching that as soon as possible because remember in her mind, she is exercising an option to order online rather than walk to the nearest to brick and mortar retail store and buy it from there. And she needs to be absolutely satisfied with the option that she has taken of or read it online compared to having walked into a store and picked up the items. And therefore if the online ordering system like ours does not deliver in time, if it is not prompt, if it is not responsive, they know basically we will adversely affect the choice. So I think if I just look at the numbers, I must first of all say that we are not with, we would want to be in this aspect, but it has been improving between 2018 and 19.
Speaker 2:
16:23
We will be shrinking our average delivery time by two days. So we used to be six days on the average globally. And the, I do hope that this year we'll be achieving, uh, four days. So that's a, you know, 30% of delivery time improvement if you like, to put it that way. But within that, I think it is important to look at options which give same day delivery or four hours delivery or one hour delivery depending on what the expectation of your consumers is over there. So while you have this overall picture of reduction in the number of days, but within that we have also introduced extra services. For example, we have a, we have a one hour delivery pilot, which is now operational in Brazil and Colombia. Uh, which, uh, uh, if, if an online order is placed within one hour, we can have the product directly at the, at the doorstep of the consumer.
Speaker 2:
17:22
And this is working in the, as I said in Brazil, which is one of our biggest beauty markets around the world. Uh, but in addition to that, uh, we have also piloted the uh, uh, let's say on full ride delivery in one of the Metros in India, in UK we have had a pretty full express service model, which traditionally has, has had its challenges. We have revamped complete model and now at least we can say that it would be a 12 hour delivery and having set the systems and having set the, the mechanism for the delivery in place, I'm sure we can now keep on pushing that a line further and say how can drill was come to eight hours or four hours at shore. So there are solutions, there are solutions which are available out in the market. You can either set up that capability also or you can go to somebody else to provide it.
Speaker 2:
18:21
But it's not straightforward and it's not easy for somebody who's manufacturing and distributing their products because it has to get integrated with the way that you manufacture products in your factory. There has to be sufficient flexibility over there. It has to have its way into how you plan for your demand and they will supply to it. How do you, what do you keep in your warehouses and what you don't, how far your vehicle should be from the consumer. A and maybe you need even more widows who don't distribution centers. Then we have, how efficient is your pick and pack capability. So it has a, when you start with an ambition of at the same day delivery or a few was delivery is not just about putting a truck or a van and making it run out to the consumers where you want to, whom you want to deliver properly. It has an implication on the entire upstream supply chain as I described.
Speaker 1:
19:21
And I'd love to actually, I'd love to because one hour delivering Brazil to me is mind boggling. I mean, it's just like, it's an incredible achievement. Um, and I, I mean, and I think we should stress it to the listeners because maybe not everybody knows. And, and I mean, I am aware that, uh, and some people are aware the food, uh, the footprint that you have, which is, which is amazing in Brazil and is probably one of your largest market if not the largest, but still one hour deliveries is, is enormously fast or it's incredibly fast. So maybe let's go a little bit into that particular one and I, I don't know, maybe if you can share some insights into how did you get there? I mean, uh, you know, cause also, I mean, I imagine before it may be maybe one day or few days, what was the process of thinking good? What were some of the things that you did? Maybe some lessons, you know, some practical if somebody was listening to this podcast and wanted to take something practical away from, you know, from this, um, major achievements of delivering within one aisle, using your own kind of network, how did you do it?
Speaker 2:
20:19
So I think first, first thing was a realization we cannot do it alone. And we entered into a partnership with a company which is a local delivery company with approximately 1 million subscribers in Brazil and or so. So therefore it's not just our products. If we had tried to set it up in our product, the cost to sell, would that be astronomy pickle because we will not ever the scale to carry over an operation like this or not all. So will we meet. We had to get into a partnership with somebody who was used to doing it, not in our industry but in other industries that therefore they have the lanes, they have the reach, they have the network which is already optimized for the local scale in which the carrying. The second part is that this is an operation which you cannot do in a large country like Brazil everywhere and do everyone.
Speaker 2:
21:14
One has to segment the representatives and say that which are the ones from whom you can really get value out of this. So it can't be somebody who places an order once in a year because, because she's not really concerned about whether the product is reaching her directly. And she may be a consumer herself rather than a seller of a product, which means that she doesn't have a promise of delivery to be met downstream in the sales gene. So Rep segmentation who sells the service is another angle. And the third is about where do we do work. Although I said Brazil, but we a so far piloted it is in the Metros because Brazil is a huge country. And uh, I would be, I would be imagining if I said that it can be done anytime, anywhere inside Brazil, but where we have been able to do it as in Metros.
Speaker 2:
22:07
So I would say that are, uh, so first is a partnership. Second is a segmentation of your customer population and maybe combined with the segmentation of some of our product portfolio also, because some of the things like color cosmetics can be delivered instantaneously and some others people may be prepared to wait flight. So segmentation, which is the second one, and about being very focused on the centers at the geographies where you all freak the silence because you know, once you advertise this service it's a promise and then then a customer would measure you against that and you better be sure when you are promising this that you will be able to deliver it.
Speaker 1:
22:47
Oh absolutely. I mean customers are, the selection is, is, is key. Um, and if you were to think now in terms of, and I, and I'm sure that you're already thinking and you mentioned the couple of examples as in, you know, in high density areas in India or in, in UK, um, what would be your steps in terms of, uh, in terms of other markets, right? How would you decide, okay, let's, let's, let's shorten our durations in this particular market. Cause your presence in 50 countries, right? So I'm assuming, is there like a, also a kind of a, a hierarchy of, okay, because we have, it's usually based on the volume of business or density of business. How would you make the decision, okay, let's, let's go into shortening this durations for delivery in this country versus that country versus this country.
Speaker 2:
23:31
Yeah. I think one of the, uh, one of the better meters for that would be how well penetrated is e-commerce in that country because more of the penetration of ecommerce, more that customer expectation of a quick and prompt delivery. Yes. So, so that's the first criteria which I would use is that how strong is the customer expectation because that is a cost attached to it and therefore other customers prepared to pay for this kind of a service. Does it really matter to them to an extent that you can judge or Nola mode or whatever in every delivery. So that would be the first. They're better we, which if I would use to get this, the second one would of course be the, the practicality and being able to do it, which are the cities where you can really offer this promise and live up to it.
Speaker 2:
24:21
If you're trying to offer it in a, just for an example, the eastern part of Russia, then probably you will never get there, you'll probably never be able to fulfill the promise. And the target is very loosely speaking, is this expectation is much more prevalent in the developed countries. I would say that geographically speaking, I would look at either our big businesses like Latin them like Brazil, which I mentioned, or I would look at Europe with where the customer really wants this and they're used to this kind of a service. So then there were lapping criteria, I would say, uh, the penetration of ECOMMERCE, which is it first, then the, the stage of development of the country in terms of its economic development, uh, and the size of our business. And uh, we can, we really achieve with practically speaking and where we cannot. Yeah, I, I would, he would want to introduce this kind of a service if I had even a 10% probability of not being able to beat it.
Speaker 1:
25:27
And maybe let's discuss a little bit the, the, the challenges that you're facing in the different markets. Because you sit and you have a global position being the chief supply chain officer and you have very good visibility in the different markets. And you have that in America, which is, which is a very large for you. I think it's supposed six to 60% of the business I was reading. You have Europe, you have Asia, you have, you have Africa as well, right? Uh, in South Africa that this and this and far, so maybe we can, I think North America you divested that business. So, um, maybe you can tell us among this four regions, Latin America, Europe, Africa, Asia, what would be some challenges may be specific to each, um, and a little bit on how you addressing.
Speaker 2:
26:08
Yeah. So let me take Europe first. Europe is all about a good product, high rate of innovation and outstanding service. So it's about making sure that your operations are as efficient as you as they can be, even if it comes at a cost. Because there is the ability to charge a price for this. So Europe is about perfection. If I put it simply that it's about supply chain perfection. It's about having outstanding products and delivering them outstanding. Uh, Isha is more about will. I would also maybe cut it up into a country where we have a strong business, which is Philippines and in the Philippines I would just look at making sure that we keep expanding our geographical footprint, keep opening more of more and more stores because that is the model over there where the reps come to shop and run a very efficient supply chain with very affordable for much.
Speaker 2:
27:09
So affordability and reach would be the key to grow our business in Philippines. Now if I look at the two big growth engines of the world, not just for us, which is for everybody, which is China and India and the out of the defined growth engines, that is about growing a business from a very, very small size. Give it the magnitude of these countries into something which is really meaningful languages which has, which has got scale. So it's a, and that can come through a combination of factors. Usually it is about geography and putting a, developing more representatives in that wider areas of the country so that we have more channels. We have a critical customer network and so on. So, so therefore India and China as the growth agents about increasing the, the size of the front end and having the supply chain capability to deliver to them.
Speaker 2:
28:05
Again at an affordable cost. You'll see that the affordability team is something which runs all across Asia and Africa. Whereas if I look at developed markets like Europe, like what I already said it at the rate of innovation and your ability to land newness with speed, which stocks my train more if I come to Africa, which is uh, which, which is a very, very interesting proposition that goes on African businesses largely centered around South Africa and the whole Subsaharan Africa is there to really be able to penetrate and the, and the makeup production teacher, what they have effectively and all the more, it has an even greater focus on affordability than the other markets which have, which I talked about. So Africa is all about being able to put a good affordable product on deals and making it reach the last customer who wants it. So they earful it.
Speaker 2:
29:05
It's a slightly different events going all around. Yeah. And Latin America, uh, I will say that Brazil is closer to the way that we would operate in Europe where the rest of the countries that Brazil resilient Mexico are closer to, uh, the European, uh, uh, supply chain, uh, uh, philosophy, uh, who it, whereas the other countries, Colombia and the, and the, the, the southern cone, uh, they are closer to the [inaudible] philosophy like the Philippines on which I described. So there's a [inaudible] says that for the developed market we focus on efficiency is you miss a journal of innovations and for the developing markets, you focus on increase of your reach, a broader network while keeping your affordability of production chick.
Speaker 1:
29:55
Hmm. I, I this, this question just came fresh into my mind and I was just curious because on the one side you have different markets and different needs for each of the markets. On the other side, I'm sure that there's global initiatives and it might be from a technology perspective, it might be from a systems perspective, it might be from an integration perspective. Would there be certain tools or certain specific platforms or, I mean you don't necessarily need to name them in particular, but I'm just curious for even as a, as a global brand, would there be something that globally you implemented and rolled out in the different, um, in the different, uh, sub regions or continents and it, it made a lot of, a lot of impact in dysplasia operation?
Speaker 2:
30:38
I think one thing which I would call out is a, is machine learning and demand forecasting, particularly in the European markets where we have deployed a tool which was built in house, which is let's say an artificial intelligence tool for uh, for fine tuning your demand plan, demand forecast campaign after campaign. So it labs based on the previous series that you've done. And it's a very complex algorithm, which lots behind the engine, which is primarily looks at all kinds of factors, the way the, the, the economy situation of our town. And Shawn and soulful and the effect that all of that [inaudible] and you get the output over there, which is a reasonably accurate. Now, when we started with this tool a few months ago, uh, we were getting results, which were I would say, a complete disaster. But that is the very nature of the tool is that can be enough to campaign it loves and it starts becoming more and more accurate.
Speaker 2:
31:35
So I think that is a tool which we have already started, the which we rolled out and uh, in four markets around the world. And that's one thing which I am quite confident that very soon we'll be able to roll it out globally. We need to of course be careful because in a while it is a tool which loves itself. But as I described to you that I will, city of the markets that are always going says on a, how you run, entered, how you operated, how green are your people, how people are mistaken, the input and output of the tool. Because any artificial intelligence tool can very soon fall prey to what they call garbage in, garbage out. Yeah. So you need to be careful of the quantity of the inputs that you're able to provide into it also. So I think that is one, one, one, one global tool that we are putting in place and my commercial colleagues that are also now putting in a similar tool but different, but also based on artificial intelligence in being able to project the number of representatives new and old. And that when you put a, that we had liked to seal the demark coming in. So if you've combined these tools, one is predicting that important variable of number of [inaudible] and the second one is predicting the demand for representative. But if you combine that, then you come to a reasonably or progressively more accurate demand forecast.
Speaker 1:
33:01
Yes. Um, and in terms of the, um, I wanted to ask you the question from our perspective of, of, of um, let's say medium sized manufacturer within FMCG or cosmetics or, or, um, or, uh, you know, similar industries, um, because Avon is a, is a big brand. And then before that you were with Unilever. Um, this, this brands and these companies are built over many, many years. And they have big budgets. But let's say you were put in a position where you were leading the supply chain function in a smaller company that may not have the same type of budgets, um, as, as Avon has. What would be some of the low hanging fruits you would focus on first, optimize your supply chain in today's world?
Speaker 2:
33:44
Yeah, I can assure you I don't have a big budget.
Speaker 1:
33:51
Yeah. Maybe I didn't frame the question properly, but yeah. Yeah.
Speaker 2:
33:55
But I think coming to your question, uh, there two or three things which come to my mind first is that any medium scale, uh, or a smaller enterprise needs to keep its fixed costs as low as possible. Even if it comes at the cost of higher variable cost. One can always increase the fixed cost by investing more capital. For example, building your own factory or owning a warehouse or something. But the starting point as you are trying to expand is to keep those six cost low. The second I would say is, uh, is about keeping the portfolio very sharp and very targeted and they need to be a very good understanding of good complexity and bad complexity in the business. For example, having any types of fragrances and offer may actually be a good thing because it is subjective and the consumers have preferences and they may choose one over the other.
Speaker 2:
34:53
Same thing about gallows in a, in a lipstick caught on a nail varnish for instance. But then maybe other complexity, you know, for example, in, in Queens, yeah, you may not need as much complexity as you would in the other two examples which are coating. So I would say for a company which is smaller, it is extremely important to keep the portfolio focused with the right consumer insights on what is good complexity and what is [inaudible] complex. So fixed cost complexity of the portfolio. And the third thing which I would call out is, uh, if I were in that position, I would not hesitate to develop more and more partnerships in the areas of distribution, logistics, even manufacturing through contract manufacturers and so on. Just to leverage the greater scale of somebody else unlimitedly in the supply chain. Whether you should go on your own or you should go in collaboration or partnership with somebody is a function of whether the other person can create more scale across different customers or you can create more scale across your type portfolio. The same applies to buying. So therefore I would, I would, I am a strong believer in a strategic partnerships, be they be the across, uh, maybe outsourced operations beat across a buying beauty across manufacturing. We'd across distribution. So that's the third element which I will bring it to it to not hesitate to develop some bold partnerships in the, in supply chain areas.
Speaker 1:
36:28
And that's an excellent point. It, it brings to my, it brings to my mind an example of a, one of our, one of our clients is in the um, appliances industry and basically a, I won't name them, but for simplicity to say that I'll just say that they acquired a company that had in the range of 150 staff and they were making this a two or three appliances for the, for the kitchen. That's all they were making, two or three, but really, really, uh, innovative products and all the stuff that those guys had were around 100 5,200 stuff because they mostly only did the r and d side and a little bit on the marketing side. But even that was mostly outsourced. The contract manufacturing. I mean it was done through that meant the product was manufactured through contract manufacturing. Uh, logistics were outsourced, everything was so basically they bare bones.
Speaker 1:
37:14
The business only to the unique selling proposition was, which was the patrons, the R and d development and the company bought them over so that they can learn from them how to transform. Um, the company was a bigger conglomerate. How to transform themselves. So that kind of goes with your very well with your point of, you know, build partnerships wherever, wherever you can keep the core, keep the, keep what's unique and keep what's your, um, added value and advantage to the market. But other than that, if you can outsource or you can work with partners that easier.
Speaker 2:
37:48
And I think without naming it, I can guess the company which you're talking about, and if I'm right on my guest, this company has grown by 200% in the last five years.
Speaker 1:
37:58
Yeah, yeah. Or more. Yeah. Something like that. So, so yeah, we'll, we'll share separately. But, uh, um, I wanted also to bring the discussion to the, um, it talent and, and human resources side. And then, you know, the supply chain function is a function of, of people like they call companies actually in all functions at the end of the day. Um, I'd love to, I'd love to, to, to get your thoughts also in terms of attracting people and attracting the right talent and skillset to the supply chain world, which is like all the other functions, uh, changing. And there's a lot of a transformation going on. How do you a particular in particular managed to attract the right type of talent in your team and the right type of skills as well. Because also the, the, the skill set is kind of blending. Now you have, you know, the, the, the technical, the course placement skills, the digital skills, the technology types of, of skillsets. How do you, you know, how do you keep this mix well and, and and balanced in the team?
Speaker 2:
38:57
Yeah. I think first of all for me when they were hiring any new talent, the top line is does the person have a business acumen? Because the days when supply chain, it could operate as a silo. To my mind, no longer their supply chain. People have to be businessmen. If you look at the three competitives of supply chain, as I always keep saying it is service and that is about growth. It is cost and that is about profitability and it is working capital and Capex, which is about Gash. And really if you connect the, the, these three better terms of the supply chain with the three better. Does of any business, which is growth, profitability and cash cashflow. We are not doing anything in the supply chain, which is different from what the businesses doing. And if we are doing something which is supply chain for the sake of supply chain, I think we should stop it.
Speaker 2:
39:58
We for does not align with any of the business imperatives. So they are full in dms of tailored. My first and foremost criteria for anybody who's joining the supply chain is to say is to ask the person the question, show me, how are you a business leader? If you will theoretically be asked to run the business in a particular country with flute wound up P and l responsibility. Do you have what it takes to be able to run it? Yeah. So that's, maybe I'm, I'm seeing it a little differently than work by supply chain colleagues. Uh, uh, had been used to, or I had been used to myself in the past. Uh, but really in this world, with all the connectivity, with all the growth criteria, with all the boom and bust of companies coming in, companies going out unlistened the supply chain, we behave as true businessmen.
Speaker 2:
40:49
We will not be able to understand what we can do within the supply chain. Yeah. And that, that, you know, that immediately introduces values like entrepreneurship, practical creativity, uh, augmenting the business and being an enabler rather than a, as one. Often here's the word, uh, it's a supply chain constraint. I hate that phrase. Whether it comes to me and said, why am I a constraint? How can I change that? So that's the first one about being a businessman. And the second one is not to forget, is that supply chain is an area which requires skills. It requires skins to understand how an SNOP process should be working, how remark planning should be done, how Apu should be run, what can you ruin back office? What do you need to do with the front of the markets? Uh, how do you optimize your cost structures and buying?
Speaker 2:
41:41
How do you, uh, mitigate for [inaudible], particularly when you are operating on developing markets, on your incoming materials? How do you operate with the most optimum manufacturing footprint needed to centralize norcal segmented? So, and that is therefore in the, in the, I would call it in the box of skills or supply chain skills. But that to me comes often the business excrement. If you have the business acumen, you know exactly what skills you should be learning and one could start picking them up pretty soon. And the time you, one, it's not just about hiring one person, the person you hire should be, uh, a catalyst of a role model to bring more people like themselves and to develop more and more people down the line who think and who behave. And with the same superlative skillsets as, as a, as a new hire at the company would have. And that's about with, so it's about business acumen, it's about functional skills. And it's about your ability to develop a team who can really, uh, work with the same level of enterprise and creativity as you want to work.
Speaker 1:
42:59
And I, I'd love to also pick your brains a little bit in terms of the future, that five, 10, 20 years down the line of let's say five to 10 years on the line, not to go too far off. Um, and in terms of the skills, a functional skills, not the soft skills, but the functional technical skills because again, technology is changing rapidly. Everything. And you mentioned machine learning. You mentioned the tool that you have developed on, on that side. There's more and more tools being developed in, in different, uh, tech angles of the business. Do you see a shift also in the type of skill sets that people will need to pick up in the supply chain function in on top of, you know, the SNLP, the demand, planning, the, you know, the usual. What would have been a so far, are there certain blends that you see coming in in the next five to 10 years or some other new things that may be coming in or useful things for people to pick up?
Speaker 2:
43:51
Yeah, I think you already named it. The single biggest fast formational mega trend that we're sitting on per day is technology I'm in. You just have to look back five years ago and were to think that what stage was ecommerce in that time? How many products could you order through your smart phone? How many people indeed had smart phones by what, nine years ago? And that predicts you to the future? Is that what will be coming? Is that perhaps, uh, uh, something which we cannot completely even comprehend, but we know that it will be in the space of, uh, of, uh, of technology. Increasingly, consumers will vote pustules products and we are working on a thought process on that is that if somebody says that I want a fragrance, which should be custom designed by me, I want a little bit more of this kind of nodes centered, a little less of floral loads and so on, then we should be able to concoct it for her in a bottle design of our choice and a cap of a choice and the declaration of our choice and probably even had named monogrammed on it.
Speaker 2:
44:59
Yeah. That manufacturing flexibility, that level of customization is, is I would, I would foresee if I just look into the future is something which will become, which will start driving consumer preference and the technology to enable that is already there in parts. Yeah. It's, it's, it's just that the deployment of that technology hasn't happened on, uh, on a large scale. Yeah. So, uh, so the related areas of technology, uh, product personalization are clearly things which I see, uh, coming up in the future. The other one which I see is the, around sustainable products and on this whole thing around plastic packaging, for instance, which is a, of course already, uh, a very important, a driver of preference. Uh, and how do we make our planet more sustainable through products which are more sustainable. If we look at the footprint of products of personal care around the world, then I would say around 60% of the impact of the environment comes through the product itself.
Speaker 2:
46:07
And the rest is to distribution, manufacturing, all the raw materials in shore. So therefore, uh, how you design your products to be a more sustainable, more ecofriendly or they will buy, are degradable et Cetera is certainly becoming a bigger and bigger driver. You can see food products, how it is driving preference. Consumers increasingly want to know where the Radiant's at. My in my food product had been forced from an empty bin sourced responsibly. We know about the palm oil debate for instance, we know about the cocoa debate and so on. And therefore the, the whole sustainability proposition, uh, in the production's going to become an increasing Gregoire. And that even goes back and links to the technology point which I was making earlier, which is blockchains. Where did it originate from? Where did the last ingredient did it originate from? Was it tools for responsibility?
Speaker 2:
47:04
And then you know, blockchain's of bringing that visibility more and more to how one operates. You know, in, in Russia there is no new legislation. This is all real. It started happening now whereby every product needs to carry a to our core, which is unique. Not that Stu, but that particular product, that piece, that escape, that, that, that item, it is unique to that. It needs to carry a QR code that you are a coach is traced through the, through the life journey of that product from the time you make it in a factory and you start sending it out words. So these are on real trades. So placeability sustainability technology linked toward blockchains is the other team which is developing in a major [inaudible]. The third one I reach I would call out is around the, what I call the rise of the second tier cities.
Speaker 2:
47:57
So musically urbanization of our population coming from rural areas, particularly the developing markets beat in Africa and Asia and parts of leaded America will not be about uh, the London or the Shanghai or the other Delhi or Mumbai or Manila is of the world. It is the rise of the second plus a second tier of cities, sorry, which would attract increasing urbanization of customers. Consumers who are as digitally savvy as technology is as technologically connected as any of the customers in the mega cities of the world. And therefore the ability to create distribution models in this second peer cities, which are increasingly coming up in every single country of the world would be the key driver from a supply chain point of view on how we enable cult. So digital sustainability, the mega trend of suburban suburbanization if I may call it that, are the ones which are really to my mind what I can see five or 10 years down the line.
Speaker 1:
49:08
That, and also I wanted to bring forward another, another big trend which has, um, and, and I, and I like the, through the, throughout the, the discussion that, that we've, we've been having you, you keep mentioning always hurt her, her, and obviously it's, it declines the purpose and the customers that you have as a company. But at the same time, diversity in general and, and supporting women and promoting diversity has become a big theme across organizations, across multinationals. Um, and I was also a, you know, also across the workforce obviously. And I was, um, I wanted to ask you, because I know that you have a couple of projects around this that they've, one to ask you to share some of this, uh, with us and maybe also to, to share how it impacts the company's vision and strategy.
Speaker 2:
49:55
Yeah. So I think, uh, let's see. First of all, uh, we pride ourselves in being one of the biggest livelihood generators for women around the world. And, uh, as I go around the world and I talk to our representatives, I feel very humbled when a representative comes to me and she says, is that, uh, look, uh, uh, uh, she had a problem with the husband and that she was left with regard three children alone. And because she was an Avon representative, she could get her earnings and now the three children have gone to, they have graduated and they are now good citizens. They earning well, she's built a house and so on and so forth. It's weird when you're dealing with millions of representative like that whose livelihood depends on you, then it is not just about the supply chain and about making sure that you're perfect in a supply chain.
Speaker 2:
50:46
Then more treats you is that look, if you in a box that is one item which is missing than actually what your done is. Not just dissatisfied a customer, but actually hit her ownings because every product she sells, she gets that on an x out of that. So I think the first and foremost thing in this company is this prom sense of purpose in generating earnings, generating livelihoods for millions of women who work for us along the way. And I think emancipation starts from economic emancipation and this is what to my mind, we contribute towards that. Of course, we have a lot of programs. We have programs around the women's health, we have programs around a women's group, but the sorting from women into breadwinners and so on. But I think the fundamental thing which we do in this company is be of service to two women for earning their own livelihoods and doing them economists emancipation.
Speaker 2:
51:48
Now connected with that in the larger team of diversity as you, as you, as you rightly called out is also a question of how WIC and how, how insightful are we about what we've been one about the product preferences and about the shifting trains, which of course will be very different from a UK to a Philippines to a China and how do you really cater to those demands? How are they, how well are they already solved in beauty products, which will be very different from any world beauty market. Like let's say Korea compared to one of the markets in Africa and how do you really cater to her needs, storage, them all understanding the women consumer and understand for her understanding of women consumer, you need women in the organization to be able to relate to that so they full a to B. How everyone would address the diversity question or is already addressing is first of all developing it. First of all, a generating earnings for millions of women and second is about existing in our own organization on our reps to make them understand women better. And I think that is also where the role of the Aon Academy comes in because that is our training centers and that's where we, we, we, we hope to continue training increasing number of women into being beauty consultants and beauty advisors rather than curios of beauty products.
Speaker 1:
53:26
That's, um, that's great. And that's, that's a, that's a very good, uh, it's a very good analogy there, uh, advisors and partners and, and basically, um, beauty, uh, beauty advisors rather than careers. It's a, yeah, it's a great way of putting it. Um, final question from us, a victim. Um, what would be, uh, the best piece of advice that you would share with somebody that maybe one day wants to, uh, achieve what you've achieved in your career to become a chief supply chain officer? What would be that one piece of advice that stuck with you most and helped you most in your career?
Speaker 2:
54:01
Always keep connected with the business. Think business before you think of the supply chain. Be in the being the meat on the ball. Absolutely. With trends which are developing on technology. Don't be afraid to learn from others. There are enough global fora like yourselves in [inaudible], in sharing peer knowledge and learning from what others are doing and be creative. There's supplanting you can make it as drab, as function as you want it to be and you can make it as creative as you want it to be. In fact, I love people who are people in my team who go to my marketing colleagues and say that, hey, why don't you think of this? I can actually do this for you rather than waiting on the sides and then having someone come to me and uh, and ask me, can you do this? And then I say yes or no. So be on the front foot, be business connected, be creative and be completely connected with the, the, the, the developments in the supply chain around the world.
Speaker 1:
55:09
Thank you. Very good. Very good advice. And the end of the Crum. Thank you for for all the sharing, for the good, the, for the good case studies and for the good examples that you have imparted with us today and wishing you a continued success in the, in the transformation and the, you know, many more markets in which you bring the one hour delivery, um, uh, available. You make one hour delivery available and the, and all the other challenges that you've set yourself up for. And uh, hopefully we, we share again in a few, a few years, in a few months and you can tell us how you did it. Yep, absolutely. Very glad to be speaking about this rather and uh, look forward to connecting again. So many things. Thank you for listening to our podcast. If you liked what you heard, be sure to follow us on [inaudible] dot com slash podcast for all the show notes, links and extra tips covered in the interview.
Speaker 1:
55:58
Make sure also to subscribe to our emailing list to get the news in the nick of time. If you're listening through a streaming platform like iTunes or stitcher and you like what we do, please kindly review and give us five stars so we can keep the energy flowing and get more people to find out about our podcast. I'm most active on Linkedin, so do feel free to follow me to stay tuned for our latest articles as well as future guests for the podcast. And if you have any suggestions or any other idea, please feel free to write to me. I respond to all, and also please make sure not to miss our next episode where we will be having a few other c level and top leaders in supply chain joining us. Stay tuned.
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