Localized global approach for managing supply chain risks

I sat in on a panel debate today at the World Trade Group meeting for Supply Chain and Logistics Europe in Berlin last month.  During the panel, I had an opportunity to speak with Clemens Woerhle, Head of Beiersdorf’s global end to end supply chain operations, including manufacturing, logistics procurement, and S&OP.

You may not know Beiersdorf, but you would certainly recognize their major project, Nivea.  Beiersdorf is a cosmetics company, specializing in three major lines.  The mass market sector is Nivea cream, the Pharmacy sector is Eucerin, and La Prairie is a selective anti-aging cream.  The company has 5.6 billion euro’s in sales and 18,000 employees.

Consolidation of plants

Clemens discussed how Beiersdorf went through a major European consolidation in 2007.  Prior to that time, any general manager could build a plant in his own country if he wished a highly decentralized approach.  This was put to an end in 2007, and a centralized approach was taken where the decision was taken out of the hands of the country manager.  The manufacturing network went from 12 to 5 European plants, and also significantly the 15 distribution centers in the last year to a more manageable number.  There were of course many issues to consider.  Initially the cost focus that drove these decisions have moved to a service focus, with a greater emphasis on logistics agility.  There is also a risk issue to consider – for example, Beiersdorf has factories that are fully dedicated to a single which increases risk. They have started to build in secondary plant capacity to offset this risk.

To localized global approach

To focus on service, the company has begun to drive from a centralized approach to a more localized global approach, with some level of centralization around process. By applying a common process that can be driven globally, the company has also placed a strong emphasis on development and people, recognizing that there are regional differences that have to be allowed to occur to account for local requirements.  Clemens is of the opinion that the same process can be modified to accommodate different global differences, whether driven by governments, local consumer tastes, packaging preferences, or other issues.  This approach is providing dividends, as the company expands to China, India, Brazil and Latin America, and Russia.

Robert Handfield, PhD
Bank of America University Distinguished Professor of Supply Chain Management
Co-Director, Supply Chain Resource Cooperative  Poole College of Management NC State University

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