Tarik Toprak: “Growth brings its own challenges.”

Nine questions about the topics on the supply chain agenda of a supply chain professional.

By Helen Armstrong  (Supply Chain Movement)

Confectionary products such as Ferrero Rocher, Nutella and Kinder Bueno are loved the world over. Four years ago the Ferrero Group set up an office in Istanbul and, despite the crisis, turnover has increased steadily. Last year Turkey contributed Euro120 million to the Group’s Euros 8 billion turnover. Tarik Toprak, supply chain manager for the Ferrero Group Turkey, explains the challenges of starting-up a new factory, doing business in a non-EU country and maintaining the mission of producing high quality, fresh products while upholding the company’s social and environmental values.

1. What is the strategy of the company/supply chain: operational excellence, product leadership or customer intimacy?

The company focus is on the consumer although our supply chain strategy at the moment is to support our growth. Ferrero set up activities in Turkey four years ago and volume has been growing at a steady 20-25% per year. We are seeking the best solutions while using the best raw materials and paying high attention to hygiene and sanitation in the warehouses and transportation. We are already market leader in terms of turnover but we reckon it will take about three years before we are market leader in terms of volume. To support this growth we have already built a factory in Turkey and this has been operational for four months.
Also, our supply chain strategy is focused on product freshness and quality. Our main driving force is to have fresh products in the market at the targeted costs, not necessarily the lowest costs. We are supplying two types of product; one with a 9-12 month shelf life and the other, Kinder Pingui and Sud dilimi (Milk slice), with a shelf life of just one month. It is a very important product in Turkey and is sold refrigerated. It means we need two different lines, two different types of storage, two shipment strategies all organised around product freshness.

2. What is your responsibility regarding the supply chain?

I am responsible for operations in Turkey. This includes communicating with the commercial team which is located in Istanbul and the factory which is 500 km south of Istanbul in Manisa. In addition we also receive products from four of the Ferrero Group’s 20 factories so my team is the link between the market and the production sites. We are reaching 80,000 point of sales but 150 of these are retailers who sell 60% of our turnover.
Management of custom clearance is also an important part of my responsibilities. Because Turkey is not part of the European Union, importing products is very difficult because the government wants to support local production. Anything connected with food, even glass jars, is subject to very strict controls.
I am also responsible for customer service management, distribution, portfolio management and cooperation with commercial teams. We have 23 people in the supply chain team split roughly 40% in Istanbul and 60% in the factory.
The confectionary market in Turkey is saturated yet we are achieving more than a 20% rise in sales and we have switched from importing all our products to manufacturing locally so there’s always something new and exciting to do.

3. What are the main business challenges that drive supply chain projects at the moment?

The fact we are growing is very good but it brings its own challenges. One year ago the challenge was organising the building of the new factory. Now it’s running a factory that is 500 km away while the commercial team and our main market (35-40% of our turnover) is in Istanbul.
Manisa is not the optimum place in terms of supply chain logistics, such as for man power and transportation. However, we built the factory there for the high tax incentives offered by the government in that region.  Istanbul is already well developed so the government is encouraging investment in other areas of Turkey to slow down the rate of migration from rural areas. Although having the factory in Manisa is difficult for us in the supply chain, it‘s outweighed by the benefits to the whole group.
In order to optimise the situation we are trying to work closer with our distributors, suppliers and the retailers to make optimum production schedules and better run transportation to the benefit of us all.
Another business challenge is building up our export business. At the moment the factory is only running at about 30-40% of its capacity. We are already producing for export to the Middle East and North Africa and as a group we are trying to establish the individual requirements for different countries, such as Iran, Iraq, Jordan etc to work out the best logistical solution. Is it better to supply from Turkey or from one of our other factories?

4. Which supply chain challenges keep you awake at night?

These business challenges already mentioned keep me awake, especially customs clearance.  It takes about four weeks for imported fresh products to clear customs. During this time we cannot touch or move the goods so stock management is also difficult. Some of the fresh products and raw materials are imported frozen and then dehydrogenated /defrosted when we need them.
But on top of that, the chocolate business is very seasonal. In August sales are very low but then in September, when the children go back to school, there is a huge peak. 20% of annual sales occur in September and half of that is in the first week. We have to ensure that our product is available, on time, otherwise we loose shelf space. Managing the warehouse and negotiating with factories during this period is a very big challenge. So is forecasting with accuracy. We are growing by 20% per year and at the same time we are trying to launch and reposition products. When we compare our forecast to actual sales by SKU, out of the nearly 30 companies in Ferrero we are in the bottom 5. Our response efficiency needs to improve as retailers in Turkey will not accept a fresh product if the shelflife has already passed one third of this period.

5. What do you do about these challenges?

We are trying to build non-commercial relations with all the retailers such as Carrefour, Tesco and Metro so that we can build a common forecast. Until now our commercial teams were trying to gather information and consolidate it but this has not been working very well. Step by step we are trying to have direct contact with our retailers.
Five years ago this collaboration would not have possible, but now retailers are also willing to cooperate to improve the supply chain flow, such as through more direct deliveries, combining shipments to different customers in one truck and building common score cards.

6. Who do you like to meet for exchange of knowledge?

I try to meet people who are in a similar but position to myself but who working for one of our competitors such as Nestlé, Kraft, Mars and a few, dominant local players. Although we’re competitors in the marketplace I don’t see us as competitors in terms of supply chain or logistics flow.

7. Which book has inspired you the most and why?

Last year I read Outliers, the Story of Success, by Malcolm Gladwell who explores the reasons for success. Although it can be partially genetic, the book also reasons how success comes from good timing, correct education, training, repetition etc.  It gives many different examples of how people were successful by being in the right place at the right time.

8. Where do you expect to be professionally in five years?

I would like to have some sort of regional function so that I can manage different countries and meet different cultures. On the other hand starting my own business could also be a possibility.

9. What do you use for an agenda?

It’s electronic, mostly Outlook and my Blackberry.