+ISSUE 2 2016

Delivering the LTO PROMISE —

Consumer Demands DRIVE GLOBALIZATION—

Popularity ofMADE TO ORDER—

Simulation MODELING

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OFFICES

NORTH AMERICAHAVI Global Headquarters3500 Lacey Road, Suite 600Downers Grove, IL 60515United States of AmericaPhone: +1 (630) 493-7400E-mail: info@HAVI.com

ASIA-PACIFIC MIDDLE EAST / AFRICAHAVI3A International Business ParkTower B, #08-10/13ICON @ IBP609935SingaporePhone: +65 6895-2100E-mail: info-asia@HAVI.com

EUROPEHAVISchifferstraße 16647059 DuisburgGermanyPhone: +49 (0) 203 7090 2600E-mail: info-europe@HAVI.com

HAVI3 Furzeground WayStockley ParkUxbridgeMiddlesexUB11 1EZUnited KingdomPhone: +44 (0)20 8606 3118E-mail: info-europe@HAVI.com

LATIN AMERICAHAVIAv. Garcia del Rio 2477, 9 BBuenos Aires C1429DEAArgentinaPhone: +54 (11) 4519-0690

HAVI is a global, privately owned company focused on innovating, optimizing and managing the supply chains of leading brands. Offering services in supply chain management, packaging, logistics and recycling & waste, HAVI partners with companies to address challenges big and small across the supply chain, from commodity to customer. Founded in 1974, HAVI employs more than 9,000 people and serves customers in more than 100 countries. HAVI’s supply chain services are complemented by the customer engagement services offered by our affiliated company The Marketing Store. For more information, please visit HAVI.com.

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This Issue

4MARKET INSIGHTS

6VANTAGE POINTDelivering the LTO Promise

8INDUSTRY INSIDER Rethinking Supply Chains to Deliver a Seamless Customer Experience Across Channels

10 INDUSTRY INSIDERGone Global – How Consumer Demands Have Driven the Globalization of the Supply Chain

12 FOCUS ON THE CONSUMERExpressing Ourselves in Lattes and Bowls – The Popularity of Made to Order

12 INDUSTRY INSIDERSimulation Modeling: Using the Power of Data to Create a Lean, Agile Supply Chain

14ASK THE EXPERT Klaus Rueth

16CASE STUDY FOCUSHAVI Helps Global Beverage Retailer Increase ROI

18IN THE NEWS

19 ON THE ROAD

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TASTEMAKERS

Leading European plastics manufacturer Greiner Packaging has entered the booming coffee-capsule category, seeking to elevate both product taste and sustainability standards versus what is available today. The company’s plastic coffee capsules are manufactured using multibarrier technology (MBT)—polypropylene plastic with a barrier layer of ethylene vinyl alcohol (EVOH)—which creates a higher oxygen barrier inside the capsule. By enabling better protection of the coffee from external factors, Greiner’s capsules deliver a longer shelf life and improved aroma protection. The company’s meticulous production process also boosts category standards for sustainability. A fully automated camera system oversees the entire touchless production and filling processes, while the use of computer tomography for quality control ensures that each capsule is manufactured and filled to precise measurements. Any rejected capsules are ground up and fed back into production, thereby reducing waste.2

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CREATIVE CoffeesToday’s coffee drinkers want more out of their coffee. The National Coffee Association’s latest Drinking Trends report shows a marked increase in consumption of gourmet/specialty coffees over the past eight years: from 13 percent to 36 percent for people aged 18–24, and from 19 percent to 41 percent for those aged 25–39.1 Capturing a share of that growing market means that companies need to think outside the box when it comes to giving consumers a high-quality, memorable product experience.

BREAKING DOWN Plastic Alternatives

The United Nations Environmental Program estimates that 110 million tons of plastic are used annually worldwide, with much of it ending up in landfills, where it can take up to 1,000 years to decompose. In general, relatively little plastic is recycled due to the risk of contaminating a recycling stream as a result of differing chemical compositions in various plastics. As concerns over the health of our global environment increase, researchers are developing and expanding on creative alternatives to traditional plastics.1

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ON-THE-GO CUP OF JOE

FORTO, a two-ounce organic-coffee energy shot with twice the caffeine of two regular cups of coffee, needed to convey its innovative product proposition in an intuitive, appealing way to the brand’s target consumer. Choosing to replicate the familiar, premium look and feel of the to-go cups found at coffee shops, FORTO collaborated with Berlin Packaging to create a miniature version of the coffeehouse experience. The package was designed with a “coffee-cup-lid-style snap-on closure” to help associate the product with coffee while differentiating it from other energy drinks. A bold, brown color palette on the shrink sleeve and closure helps further the coffee connection. FORTO’s special injection-molded polypropylene resin package is able to handle 190-degree temperatures with durability and integrity, with a conduction-sealed lid that utilizes a custom foil-based liner. The end result? A compact, highly portable, spill-proof package that is perfect for on-the-go sipping.2

_1 The National Coffee Association. (2015). NCA National Coffee Drinking Trends 2016, The National Coffee Association. Retrieved from http://www.ncausa.org 2 Greiner Packaging. (2016, January 27). Greiner Packaging Forges Ahead in the Coffee Capsule Market (Press Release), Greiner Production. Retrieved from http://www.packagingeurope.com3 PackagingStrategies.com (2016, April 18). Coffee Package Mimics a To-Go Cup, Packaging Strategies. Retrieved from http://www.packagingstrategies.com

EDIBLE CUTLERY

India-based startup is broadening its plant-based line of spoons. Dubbed Edible Cutlery, the original spoon (a rice-, wheat-, and sorghum-based product) is completely safe to eat, but also fully biodegradable if people choose not to eat it. Organic, vegan, and kosher, the spoons do not have any added chemicals or preservatives and enjoy a shelf life of approximately two years, yet only take a few days to degrade naturally. Broad success of the appealing “green” spoons inspired the company to continue innovating; Bakeys now has prototypes of forks, chopsticks, dessert spoons, and soup spoons. The company also has plans to create taster spoons, coffee stirrers, and toothpicks. As more consumers adopt the innovative product, Bakeys hopes the use of Edible Cutlery will contribute to helping the global water crisis, environmental sustainability, and climate change issues.2

BIOBOTTLE

Iceland Academy of the Arts design student Ari Jónsson recently created a red algae bottle capable of fully decomposing after use. He states that he was inspired to invent the bottle after learning that 50 percent of plastic is discarded after just one use. Jónsson experimented with multiple materials to compare and contrast strengths and weaknesses, ultimately choosing powdered agar (which is made from algae). The bottle is created by heating a proportioned agar-water composition, pouring it into a bottle-shaped mold, and then submerging the bottle in ice-cold water and rotating it until the liquid inside forms the shape of a bottle. The agar bottle is then refrigerated for several minutes until it can be removed from the mold. As long as the bottle remains filled with water, it is capable of holding its shape; however, once empty, it begins to decompose.3

_1 Garfield, L. (2016, April 1). These Real-Life Willy Wonka Spoons Are Completely Edible, Tech Insider. Retrieved from http://www.techinsider.io 2 Olewitz, C. (2016, March 29). To Reduce Plastic Waste, This Indian Startup Thinks We Should Start Using Edible Spoons, Digital Trends. Retrieved from http://www.digitaltrends.com 3 Dezeen.com. (2016, March 20). Ari Jónsson Uses Algae to Create Biodegradable Water Bottles, Dezeen Magazine. Retrieved from http://www.dezeen.com

VANTAGE POINT

DELIVERING the LTO Promise

OPING TO WIN BACK customers, attract new ones and drive sales, Chipotle, a brand that previously had not used LTOs in its 23-year history, recently launched a limited-period loyalty program and introduced a new menu item in select markets. Despite the popularity of LTOs, few foodservice brands are executing them as well as they should or would like to, especially when it comes to managing the bottom line. LTOs are challenging to manage successfully for several reasons. The very fact that they are

“limited” sets LTOs outside the scope of everyday supply chain operations. LTOs may involve new ingredients or formulations, changes in volume or even changes in suppliers. Lack of visibility across the supply chain is another challenge. Often, suppliers do not have a clear view deep into the chain, particularly at the restaurant level, leaving suppliers and restaurant

“AVAILABLE FOR A LIMITED TIME ONLY!”

“GET THEM BEFORE THEY’RE GONE!”

Limited time offers, or LTOs, are a staple among

foodservice brands’ marketing strategies because they

almost always generate excitement and engagement.

Consumers respond favorably to them, often looking

forward to the return of seasonal LTOs such as McDonalds’

Shamrock Shakes and Starbucks’ pumpkin-spiced lattes

year after year. As journalist Brad Tuttle explains in a

TIME article about the allure of LTOs, “the desire to avoid

missing out can be as strong as the desire to purchase

whatever it is that’s being sold.”

challenges of adjusting forecasts and shifting course in such a large, complex network when fluctuations in demand and other variables occur. Finally, when it comes to managing a LTO in restaurants, operators may require extra training to learn proper cooking, plating and/or packing of the LTO item. If order assembly is complicated or requires extra steps, order fulfillment speed will be impacted. In the event of stock-outs, operators will need to deal with upset customers (and even negative publicity). HAVI has developed a four-phased event planning process that makes strategic collaboration across networks possible and provides the rigor necessary for brands to counter the risks inherent in LTOs. These four steps are outlined in HAVI’s white paper “Delivering The Limited-Time-Offer Promise,” and can help brands maximize the success and profitability of their promotions.

operators vulnerable to costly and disruptive inventory stock-outs and overages if there are changes in plan or forecasts. In fact, it is not uncommon for foodservice companies to look back at a promotion and find that while they met their sales goals, they missed their profitability targets. The complexity of food supply chains also is a factor that makes successful LTO management difficult. To meet consumer demand for exotic ingredients and flavors and year-round availability of fruits and vegetables, foodservice brands increasingly are expanding their supply chains internationally and broadening their base of suppliers. While this can assist in meeting consumer demands and help mitigate risks of product/ingredient availability, it does mean companies have more partners to track, more systems to integrate with and longer lead times to factor into plans. The brevity of LTOs (often only 60 to 90 days in duration) compound the

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BRYAN LANGE

Senior Director

Supply Chain

Management

Phase 1: Event initialization. Integrating data to support the promotions management process is critical. In this phase, HAVI gathers information from the foodservice brand and its trading partners to better understand what data is available, from what source and how that information will be communicated in support of the LTO.

Phase 2: Pre-event planning. The brand develops an initial menu item forecast. HAVI carefully reviews and analyzes historical sales data for the product that will be featured in the LTO. If history of the specific item is not available, HAVI looks at the sales history of multiple similar items to make an educated prediction of expected sales. HAVI also considers several other variables such as seasonality, school breaks, holidays, promotions and other events that may impact the future outcomes and adds or subtracts units to the historical baseline it has determined.

Phase 3: Event management. In this phase, actual performance is monitored against forecasted performance. Integrated near-real-time data feeds enable the brand to react quickly should sales data reveal that the forecasted demand should be adjusted.

Phase 4: Post-event insights. The LTO has concluded and HAVI analyzes what actually happened in light of what was expected to happen. HAVI reviews the actual quantity of product sold versus forecast and the planning assumptions versus actual performance at the restaurant, city, regional and national levels. Year-over-year sales comparisons also are drawn if applicable.

Done right, LTOs can be extremely successful and boost the bottom line as well as sales and store visits. Make sure your brand is benefitting from the LTO promise.

PHASE 1 PHASE 2 PHASE 3 PHASE 4

Key Processes & Outputs

• Data Collection

• Event Assumption Alignment

• Data Analysis

Key Processes & Outputs

• Initial Menu Item Forecast

• Supplier Commitment

• Inventory Planning

Key Processes & Outputs

• Menu Item Reforecasting

• Recommended Replenishment Orders

• Exception Monitoring

Key Processes & Outputs

• Assumptions vs. Actual Reporting

• Lessons Learned & Opportunities for Next Event

BEFORE EVENT DURING EVENT AFTER EVENT

LTO: EVENT PLANNING PROCESS

Have you ever researched products and compared prices

online before purchasing the items in a store? Maybe you

have returned an online purchase to a brick-and-mortar

location, or chosen to pick up your web purchase from a

nearby retailer rather than wait for home delivery.

by

SCOTT SAUNDERS

SVP Global Supply

Chain Management

HESE SHOPPING BEHAVIORS are becoming increasingly commonplace as consumers demand the freedom to shop anytime, anywhere and receive products when and how they want. Consumers are largely channel-agnostic, often beginning their shopping experience in one channel and completing it in another. And, most consumers do not differentiate between a retail brand’s online or physical presence; the brand is the brand regardless of how consumers find or receive its products. With online- and digital-influenced sales projected to reach $1.8 trillion by 2017 (source: Forrester) and omnichannel shoppers promising a 30 percent higher lifetime value than those who shop using only one channel, delivering a seamless customer experience across all of a brand’s channels is crucial. Yet, according to retail consulting firm HRC Advisory,

“80 percent of retailers are unprepared for the supply chain changes required to meet customers’ demands to shop any way they want.” Chief among the challenges they face are inventory visibility and accurate assortment planning across channels. Having product available online and in stores, providing consumers with updated inventory information and ensuring timely delivery—whether in stores or to consumers’ homes—requires sophisticated data mining, analysis and sharing. If inventory management, order delivery and fulfillment are not aligned with consumer demands, retailers risk disappointing customers and losing future sales to competitors who offer a better shopping experience. Quality data and analytics, the bedrock of successful supply chain management, are what facilitate communication and visibility across channels and enable businesses to collaborate and make informed decisions as opposed to taking action based on “best guesses” and likely scenarios. Still, the best data and analytics in the world won’t help brands deliver a seamless customer experience if the brands themselves continue to think about and operate their supply chain networks in a linear, channeled way. One network for physical stores and another for ecommerce runs counter to the concept of omnichannel. Brands ought to take a cue from consumers who are simultaneously multi-channel and channel-blind (shopping is shopping regardless of channel) and integrate their networks to achieve seamless operations and fulfillment. Information sharing among suppliers, distributors, warehouses, transportation providers, marketing

departments, individual retail stores and other supply chain partners must be clear and constant across channels. Failure to share a strategic plan or to communicate changes in the system, such as inventory overages or shortages, transportation delays or price cuts with everyone along the chain, will leave partners unaware and unprepared. The result: Knee-jerk reactions and a bullwhip effect that will wreak havoc (and cost) across the system and could negatively affect customers and their perceptions of the brand. Imagine a national brand with an online presence and physical stores across the United States. When unseasonably cold temperatures in one area of the country result in higher than anticipated online demand for winter clothes and merchandise in that region, the brand could continue to fulfill online orders from centralized warehouses and distribution centers (DCs), replenishing inventory from suppliers as needed, as it historically has done. Or, it could take a channel-agnostic approach to supply chain management and leverage visibility of inventory from supplier all the way to the individual store level, coupled with real-time point-of-sale (POS) data, to gain a clearer picture of supply available across the entire system relative to actual demand in each of its channels. Armed with this data, the brand may elect to fulfill online orders by shipping inventory to consumers directly from stores in warmer areas of the country where merchandise is moving more slowly than forecasted. This would help lower inventory levels in those stores and free DCs to focus on replenishing inventory in retail locations where demand is more closely aligned with forecasts. By thinking outside the silos of ecommerce versus store demand planning and fulfillment—by viewing the network holistically—the brand would be able to optimize inventory levels to meet demand and consumers would receive their orders in a timely manner. A win-win! The American Customer Satisfaction Index reports that customer satisfaction levels in the retail industry are down for the second consecutive year. Discounts and low prices are no longer enough for consumers nor will they earn consumer loyalty. Consumers also want shopping that works for them regardless of how or when they choose to shop or browse. They aren’t concerned with channels, and brands seeking competitive advantage won’t be either. Expect to see more system integration as forward-thinking brands adopt an omnichannel mindset and align their supply chains accordingly to deliver a seamless experience for consumers. H

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RETHINKING SUPPLY CHAINS to Deliver a Seamless Customer Experience Across Channels

INDUSTRY INSIDER

URE, A FARM-TO-TABLE concept restaurant may source grass-fed beef, organic vegetables and dairy from a few hyper-local suppliers, but most multi-unit businesses have supply chains that include international partners. The globalization is not just cost, but also a need to meet consumer preferences and demands. UK-based Standard Chartered Bank reports that global supply chains account for nearly 80 percent of global trade, including trade in intermediate goods and services. Consider a U.S. restaurant brand that offers fresh salsa and guacamole as staples on its menu. The brand may procure the ingredients for these dishes from domestic suppliers, securing tomatoes from farms in Florida, onions from Oregon, and cilantro and avocados from California. But, the growing season for avocados in the U.S. is only about nine months, leaving the brand with a three-month shortfall of the fruit, unless it expands the scope of procurement. Similarly, a cold weather snap might curtail U.S. onion harvests and a labor strike could severely limit domestic tomato production. Expanding its supply chain internationally can help the brand avoid breaks in supply. In this example, the brand might consider sourcing avocados from Mexico (where they grow year-round) and onions and tomatoes from China (a top producer of these vegetables). And it is not just

GONE GLOBAL – How Consumer Demands Have Driven the Globalization of the Supply Chain (And Why It’s Not Going to Change Anytime Soon)

about buying from outside of the U.S. Changing weather patterns, changing consumer preferences and even political instability can mean that the ideal place to source ingredients from is a moving target. Sometimes, brands have global supply chains because their suppliers’ suppliers (or, more likely, their suppliers’ suppliers’ suppliers) are located on different continents. Other times, brands unknowingly may be working with international partners. This could prove to be the case in an instance involving a U.S. presidential candidate claiming that his campaign merchandise is “made in America.” Analysis of several items of a particular type of merchandise demonstrates that at least one did not feature the specific U.S.-made fabric the U.S. manufacturer said it uses to produce the item. Origin of the non-regulation fabric is not yet known. Whether your brand already has gone global by necessity (to ensure supply) or chance (a supplier of a supplier is located in another part of the world) or you are considering expanding your supply chain internationally to cater to consumers’ demands for global products and services, there are steps you can take to optimize your supply chain and mitigate risk (see sidebar).

Think about today’s consumers browsing the global

marketplace from their mobile phones and tablets.

With a few swipes and taps, they can procure items

from around the world and have them delivered to their

doorsteps, sometimes in as little as 24 hours. Perhaps this

globalization is most evident in the selection of foods and

flavors—many that were once available only regionally

or seasonally—now available to consumers year-round in

their local supermarkets and favorite restaurants. Their

expectations have risen, rendering some domestic

supply chains inadequate in meeting their demand.

by

PETER VOSKUELER,

Chief Supply Chain Officer

Steps to Optimize Supply Chain and Mitigate Risk

F Know your suppliers (and their suppliers). Source reputable suppliers with outstanding performance records. Vet their business operations to ensure they are aligned with your brand’s values and standards. Assess their environmental footprint. Understand where and how they source raw materials and how they treat their employees and partners. Are their partners’ business practices aligned with your own? Establish contracts and service level agreements, outline quality assurance and safety expectations, agree on pricing and determine how you will communicate (e.g., what technology platforms you will use, what reports will look like and their frequency) as well as how suppliers will handle events (e.g., what contingency plans are in place to lower your risks and minimize supplier switching). Not only will these steps help you build rapport, they are essential to traceability.

F Communicate with your partners. As a supply chain becomes increasingly global, the number of partners along the chain grows exponentially. Ensure you are communicating with partners along the chain and sharing information; become invested in each other’s success. Communication inspires collaboration as well as trust. In its Special Report, Global Supply Chains: New Directions, Standard Chartered Bank notes that digital technologies that foster communications, including smartphones, computer translation and Internet of Things, are making complex global supply chain management easier. “Supplier companies can be completely integrated in managing the supply chain…[and]

everybody can be linked directly to inventory management systems.”i

F Provide visibility across the chain. While communication inspires connection and shared best interest, visibility enables action. Lead times can be long when you are working with international suppliers, but consumer demands are immediate and access to social media (and the ability to negatively review a brand) is constant, so sharing information with all partners in real-time is critical. When everyone along the supply chain has visibility into the chain, they are better

prepared and can work together to mitigate potential events or breaks in supply.

F Prepare for the unexpected. Political unrest, natural disasters and weather events, customs issues, border delays, port strikes, sustainability challenges, labor disputes – these challenges can impact domestic supply chains too, but the distance, continents and time zones inherent in global supply chains seem to magnify them. Just as you would with a domestic supply chain, prepare to respond to crisis situations and have plans in place to work around events and

ensure continuous supply if and when the unexpected occurs.

INDUSTRY INSIDER

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i https://www.sc.com/BeyondBorders/wp-content/uploads/2015/05/2015-05-28-BeyondBorders-Report-Global-supply-chains-New-directions.pdf

While a global supply chain can minimize risk, managing it is not without risk. There are more suppliers to manage, traceability becomes more difficult (remember the example of the mystery fabric found in a candidate’s campaign gear?), and lead times and shipping costs will likely increase, but the same principles of successful domestic supply chain

management apply. Know your partners, communicate with them, share information and prepare for the unexpected. The supply chain may be getting longer, but technology is fostering collaboration across borders and enabling brands to meet consumer demand for increasingly global foods, flavors and products.

MASS CUSTOMIZED AND made-to-order meals at fast-casual and quick service restaurants and convenience stores appeal to consumers seeking an alternative to packaged sandwiches and pre-cooked meals that are kept warm under heat lamps before order. According to Technomic, nearly 51 percent of consumers say customization is highly important in creating good value because it provides them control over taste and flavor, as well as the final price of a menu item.i Made-to-order also aligns with consumers’ growing preference for meals prepared with fresh and clean ingredients they can see and select. Restaurants such as Chipotle and Pieology that offer build-your-own burritos and pizzas play to this trend. Meals are crafted according to consumers’ taste preferences and dietary specifications (e.g., gluten-, dairy- or nut-free, reduced or non-fat, etc.). Millennials are largely responsible for the popularity of made-to-order food conceptsii. David Sprinkle, publisher and research director for research firm Packaged Facts, says,

“Demanding what you want, how you do and don’t want it, and when you

want it are hallmarks of millennials,” the consumer group accounting for 69 million U.S. adults currently age 18-34iii. Interestingly, demand for personalization and customization skews higher among older millennials (those aged 25-39) than younger members of this consumer group. Fifty-one percent of 25-39 year olds expressed interest in personalized products and services at restaurants compared to 46 percent of those aged 16-24, according to The Deloitte Consumer Review.iv Both age groups ranked personalization higher than those aged 40-54 and over 55 (35 percent and 29 percent, respectively). Note: While children were not included in the review, restaurants are striving to give them customized food experiences as well. Noodles & Company, for example, launched a new children’s menu in 2015 that gives “future foodies” a build-your- own option.v Among the five food trends Packaged Facts reports are driven by millennials, three demonstrate this consumer group’s preference for culinary creative expression and personalization: Mashups of different foods (think Cronuts and

bacon-wrapped pizzas), customization / made-to-order (a la Starbucks), and bowls.vi But, there could be more to the made-to-order food trend than just desire for freshness, creativity, control and health. Julie Beck writes in The Atlantic that “American culture is notoriously individualist…with personal identities [defined] as separate from communities…”vii Do consumers perceive custom lattes to be an extension of their personalities? Tangible expressions of who they are? Author Sophie Eagan (Devoured) says the American craze of mass customization “makes people feel both unique and catered to when they are able to have it their way,” and it’s a desire “to have something that feels like it meets [their] personal taste profile.”viii Regardless of consumers’ motivations for choosing customized foods and beverages, the made-to-order trend is seemingly here to stay. Expect to see even greater customization as brands continue to leverage analytics and technology to offer consumers shopping and dining experiences personalized to their unique preferences.

Automobiles, t-shirts, sneakers and even M&M’s can be

customized according to consumer preferences. Such

tailored offerings, together with omnichannel browsing

and buying options, have revolutionized the shopping

experience. Consumers want what they want, when and

how they want it. And this applies to food too.

i https://blogs.technomic.com/consumer-trends-continue-to-evolve-in-2015/ ii http://www.foodengineeringmag.com/articles/95624-report-top-5-food-trends-fueled-by-millennials iii http://www.foodbusinessnews.net/articles/news_home/Consumer_Trends/2016/04/Slideshow_Five_millennialfuele.aspx?ID=%7B081C0E64-20F9-46D4- 9861-B37D182F1682%7D iv http://www2.deloitte.com/content/dam/Deloitte/ec/Documents/consumer-business/deloitte-uk-consumer-business-mass-personalisation.pdf v http://nrn.com/kids-menu/kids-meals-leap-beyond-child-s-play vi http://www.foodbusinessnews.net/Resources/Slideshow/2016/4/Five-trends-driven-by-millennials/1.aspx?TipID=0 vii http://www.theatlantic.com/health/archive/2016/05/food-customization-america/482073/ viii Ibid.

FOCUS ON THE CONSUMER

EXPRESSING OURSELVES IN LATTES AND BOWLS – The Popularity of Made to Order

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JASON MALMASSARI

Sr. Director

Promotions

Management

DATA WILL BE REMEMBERED as one of the pillars of 21st Century business. If that sounds like an overstatement, consider the explosion of data being created around the world at a staggering scale and an exponential rate: 44 trillion gigabytes of data will have been produced by 2020. The rise of ‘big data’ and analytics continues to have an impact on the supply chain industry, with research suggesting more than a third of executives are engaged in serious conversations about implementing analytics in the supply chain, and three out of ten already have an initiative in place to implement analytics. And of course, this will be supported by continually improving computing power: today, we have the capability to analyze large and complex sets of data at an increasingly cheap cost.

THE POWER OF “WHAT IF…”

For all types of businesses – from local retail outlets to multinational industry powerhouses, the supply chain and operations are fundamental to commercial success. As a result, the capability to understand how drivers of variability can impact profitability and growth, is a huge asset to a business. A quiet revolution is taking place which is radically changing the way businesses find these supply chain efficiencies – and the revolution is being powered by the rise of data and analytics. At HAVI we have seen this shift towards embracing data first-hand, particularly in the area of

simulation and ‘virtual modeling’ – and have been developing a best-in-class approach truly game-changing approach to finding those all-important marginal gains in the pursuit of supply chain optimization. This simulation approach is about replicating business processes in a virtual environment, as a way of creating a leaner supply chain and positioning a company for future growth potential. More specifically, it’s about representing, on a sound statistical basis, current state of business – and then analyzing potential outcomes based on making small changes to a defined set of parameters (either independently or in conjunction with other parameters). In partnership with AnyLogic, HAVI recently worked with one food service business to map out thousands of scenarios in its supply chain, simulating the potential impact when tweaking key variables such as equipment and labor. By pairing up key business questions, like “how can we make the most of the space in our kitchens?”, with a set of parameters such as processes, inventory, demand fluctuations and uncertainty, HAVI was able to help the company really get to grips with the potential impact of menu changes and demand shifts on its supply chain. Speed of experimentation is key here. While a business with considerable resources may have its own physical test center, for instance, there is a limit to the volume and

speed of that type of experimentation without major cost implications. But by replicating the processes virtually, the possibilities are infinite – just by asking

“what if?” These insights have also helped the client optimize its operations around the launch of a new breakfast menu, which is expected to bring a new layer of operational complexity. But by using simulation to identify and manage potential bottlenecks, the chain could now realize savings in capital expenditure, not to mention cutting out extra physical testing and additional savings by optimizing kitchen processes. Simulation modeling also proves a potent tool when the project is too large or too costly to test in the real world. HAVI was recently asked by a customer, “In which regions does it make sense to add an additional layer to my outbound supply chain? What happens to my freight cost and service level? What downstream efficiencies do I gain in my kitchen?” Such questions would be difficult to accurately answer without advanced simulation tools.

VAST POSSIBILITIES

For HAVI and its clients, the potential uses and benefits of simulation modeling are vast. We expect to be providing this expertise across a range of sectors in future – it offers our clients the holy grail of business: better, cheaper, faster!

They say hindsight is a beautiful thing, and in business it’s

no different. But with the rise of data analytics, operations

and the supply chain can embrace an incredibly powerful

tool in simulation modeling – an approach that helps

businesses build a smarter, more agile supply chain.

INDUSTRY INSIDER

SIMULATION MODELING: Using the Power of Data to Create a Lean, Agile Supply Chain

by

NIKHIL THAKER

Director of Analytics

& Supply Chain

and

NATE DEJONG

Project Manager

ow did you get to where you are at HAVI? Before I joined HAVI I spent around 7 years working for Accenture Management Consulting, specialising in supply chain management across multiple industries including consumer products, chemicals, automotive and industrial equipment. Prior to that, I was head of strategic logistics at Hettich, one of the world’s largest manufacturers of furniture fittings. My focus there was planning; demand planning, supply chain planning and inventory planning. I’m now responsible for delivering our analytical and supply chain services while growing the business within the food service industry and beyond.

What are you are working on right now?

Our immediate focus is to ensure our offerings resonate with the market. If they are not, we need to find out why not and how it can be fixed to offer what markets are demanding. Alongside this is the challenge of applying our large-scale product services—used for customers such as McDonald's—to make them applicable to a wider variety of businesses. Aside from the large players, there are a lot of small to mid-size companies which can benefit from our services. The challenge is scaling our offerings to meet their needs.

How difficult is it operating in multiple markets across the world? A key challenge here lies in the specific market obstacles at play.

It is one thing to offer services in the US, where a customer might have over 14,000 restaurants. But selling those same services into a market where a customer might have 100 sites, for example, is a different matter altogether. They cannot afford such large-scale packages and require bespoke offerings which are tailored to their requirements. A lot of people compare the US with Europe given the similarities in population sizes. However, the crucial difference is that all of the countries operate individually. Even if they have global franchise systems, their operations differ from country to country. When we sell our services, we are not selling to Europe but to particular markets. What are the main differences within the European markets?

Of all the European markets, the UK, France and Germany are undoubtedly the most advanced. When it comes to restaurant chains, the UK is the most mature market. The choice on offer there, particularly in London, is unparalleled. Much of the best practice originates from the UK, mainly due to the linguistic advantage the country has. The challenge for us at the moment is in adapting our services to fit all of these varied markets.

How is the food service supply chain industry dealing with globalisation in comparison with other sectors? I think other industries are more developed in this respect when compared with the food service

industry. The challenge is having visibility of suppliers at every level of the supply chain. For the IT industry for example, this may not be a major issue. If the product works and is set a reasonable price, the consumer is almost guaranteed to be satisfied. In contrast, for the food service industry such liberties cannot be taken, particularly when issues around food, health and safety are at stake. As consumers have become more educated on these issues, they have also become more demanding – and helping clients meet those growing demands is a core objective for us at HAVI.

What do you make of the increased demand for local produce? Isn’t this in direct contrast to the globalisation of the supply chain?

We are able to source locally, can track produce and know the suppliers we work with. The most important thing for companies now is to reflect such practices in their marketing campaigns. Consumers now demand much more for their money – the quality or price of the product are no longer the sole purchasing factors. Where the product has originated from and exactly where it has travelled are of paramount importance. Organisations need to demonstrate they are taking the measures to address these issues.

What trends are you seeing in Europe which contradict what’s happening in the US? The way consumers are opting to purchase goods, particularly in the food service industry has changed

dramatically in recent years. Take for example Deliveroo and UberEats. Consumers now want the convenience of delivered, take-away food but do not want to be limited solely to restaurants which offer this service. This takes the responsibility of delivery services away from the restaurants and extends the offerings of such eateries to a wider group of people. The challenge for such services is ensuring the maximisation of resources. If two drivers make two separate trips to the same area, resources are being wasted. If these scenarios can be avoided, companies like Deliveroo and Uber are onto a winner. Much of this also depends on the specific IT systems which are being used. The more sophisticated the technology, the more efficient the outcomes are likely to be.

What challenges does the recent boom in delivery services present to companies? One of the greatest challenges which has come about following the delivery boom is that of the returns cycle. Whether as a result of errors in inventory or customer dissatisfaction with products, the rate at which

Whether as a result of errors in inventory or customer dissatisfaction with products, the rate at which consumers are returning their delivered products is rising, presenting a number of logistical obstacles to organisations.

consumers are returning their delivered products is rising, presenting a number of logistical obstacles to organisations. There are very few companies which have a true grasp of this issue. There is definitely the opportunity for companies to better maximise on the returns cycle.

What innovations do you see developing?

Drone delivery is something which excites me and is set to have a huge impact on the industry. The last mile of the supply chain is always the most challenging and often the most expensive part of a product’s journey. If there is one piece of innovation that can fundamentally change this, drone delivery is undoubtedly it - the whole industry has the potential to be transformed. For example, the high number of deliveries has resulted in a rise in congestion, contributing to the very pressing issue of air pollution. However, drone deliveries have the potential to relieve this congestion, speeding up the last mile of the supply chain and helping the environment as a result. Another interesting innovation is ‘automatic decision making’. The old mantra was to collect as much data as possible and try and make sense of it. However, looking forward to the future, this could be left to more automated decision making, with the potential to save significantly on energy, costs and resources. After all, a more efficient supply chain is a more profitable supply chain.

It is one thing to offer services in the US, where a customer might have over 14,000 restaurants. But selling those same services into a market where a customer might have 100 sites, for example, is a different matter altogether.

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AN INTERVIEW WITH KLAUS RUETH Senior Director of

Supply Chain Management

Europe

ASK THE EXPERT

CHALLENGE

A global beverage retailer developed a marketing program that employed a network of brand ambassadors at more than 100 key locations across the country. The ambassadors were to engage with community members and coordinate support for local events and promotions on behalf of the brand. Ambassadors researched which products were being sold in local stores, what people were drinking and their thoughts on the brand. In this way, ambassadors helped to strengthen relationships and promote brand loyalty by creating connections between the local communities, retailers, distributors and the brands. While many ambassadors were successfully meeting their objectives, the knowledge and insights gathered could not be utilized effectively and there was no way to measure the program’s success. Each brand ambassador collected and reported information in a different manner. Ambassadors coordinated and participated in events, but there was no effective mechanism across the program that enabled successful information gathering and sharing. The program lacked an efficient way to collect, aggregate, integrate and synthesize the data enabling the retailer to identify insights and implement best practices.

MARKETING ANALYTICS

HAVI HELPS GLOBAL BEVERAGE RETAILER Increase ROI

A structured process, strategic guidance, targeted analytics and new reporting tools enable a global beverage retailer to improve promotional effectiveness and quantify the impact of one of its national marketing programs. In lieu of each ambassador running his/her program

ad hoc and inputting data haphazardly, HAVI helped the beverage retailer establish a process outlining how and when reporting should be done. HAVI created new reporting solutions, including field and senior management scorecards and dashboards, which enabled ambassadors to track their performance, input data more efficiently and compare results across their regions while stewarding program performance. The new tools promoted greater collaboration among managers and ambassadors. There was now a way to aggregate information across locations and determine what was successful as well as where there were gaps, allowing program managers to better manage brand ambassadors, identify gaps in performance and work to achieve targets.As a result of HAVI’s efforts, the beverage retailer could consistently and efficiently collect information, share insights and track performance against program goals facilitating a mechanism to share best practices and determine ROI.

CASE STUDY FOCUS

SOLUTION

The beverage retailer sought help from HAVI, a global leader in packaging, supply chain services, marketing and supply chain analytics, merchandising planning and promotions management, and waste, recycling and sustainability. The company was confident that HAVI understood their business and would develop a solution that would enable them to measure success for brand ambassadors and the overall program. HAVI brought a comprehensive solution to the program. They developed a streamlined reporting process and worked with the beverage retailer to determine how to best manage brand ambassadors and gain visibility into their activities.

• HAVI implemented a series of goals that brand ambassadors could track against and management tools enabling performance visibility.

• New online portals were developed to capture and aggregate actionable data.

• Qualitative data was mined to understand trends and insights.

BENEFITS

– Insights and performance tracking Enabled the beverage retailer to utilize the data collected by a large field team and turn it into actionable insights that could influence future marketing decisions while also measuring overall promotional ROI.

– Fact-based decision making Established a fact-based approach to its marketing program which allowed it to make more informed decisions and have constructive management conversations with ambassadors.

– New reporting and data collection tools

Empowered the brand ambassadors with reporting tools that enabled them to be more informed about their locations while making data usable by driving them to consistently record and organize data locally.

– Increased visibility and efficiency Developed a consistent tracking function for field members, simplifying reporting for the brand ambassadors at the local level and improving visibility for the beverage retailer at the national level by enabling them to compare data across regions.

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Defining Fresh and Adapting Systems to Meet Demand Asian Food Journal MAY 2016 Jason Malmassari, Sr. Director of Promotions Management, and Dani Schooley, Director of Supply Chain Solutions, highlight the impacts that fresh offerings have on supply chains in this guest article. They also list what brands ought to consider before they introduce fresh in their retail locations.

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Why "Locally Sourced", "Organic" Aren't Just Buzz Words QSRweb MAY 2016

Jason Malmassari, Sr. Director of Promotions Management, and Steven Rodgers, Vice President

of Business Development, Analytics, Supply Chain and

Promotions, highlight the popularity of organic and local

menu offerings among QSRs in a contributed article to QSRweb. The

authors predict continued growth of organic and local as restaurants cater to consumers' evolving culinary preferences and increasing interest in where and how their food is sourced.

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Cold Chain Management Goes High-tech Snack Food & Wholesale Bakery MAY 2016 Eric Pfeiffer, Sr. Director of Supply Chain Integration, comments on the cost of system upgrades and implementations necessary to comply with FSMA traceability requirements in this article about advances in cold chain management.

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Transforming the Packaging Landscape Innovations in Food MAY 2016 Phil Davidson outlines why sustainability remains a key issue for the packaging industry, and how PET technology is a significant breakthrough that is transforming the way companies think about packaging and sustainability.

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The Case for Private Brands Transparency Store Brands MARCH 2016 Jason Malmassari, Sr. Director of Promotions Management and Steven Rodgers, Vice President of Business Development, Analytics, Supply Chain & Promotions, share insight on the importance of transparency and how consumer loyalty can be predicted based on the amount of information available to them.

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57th Annual MUFSO (Multi-Unit Foodservice Operators) Conference Dallas, TX, North America OCTOBER 23-25, 2016 MUFSO brings together the restaurant industry’s top leaders, innovators, experts and change makers for 2½ days of high-caliber educational content laser focused on the restaurant business. Attendees can take advantage of thought-provoking keynote speakers, interactive panel discussions and highly engaging one-on-one interviews with industry visionaries, as well as unique networking opportunities and the latest in food and spirits. HAVI is participating as an exhibitor in the Supplier Exchange in booth 610.

EVISIT HAVI.COM TO LEARN MORE

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BULLETIN

IN THE NEWS ON THE ROAD

Packaging Innovations Olympia Conference CentreLondon, UK, Europe SEPTEMBER 14-15, 2016 Packaging Innovations London offers opportunities to network, see product innovations, and experience the latest from the packaging industry. You won’t want to miss out if you are launching a new product, updating your brand, creating a new marketing campaign, looking for ways to reduce the environmental impact of your packaging, creating a special edition of your product, sourcing new suppliers, looking to find out what competitors are planning, or hoping to apply innovations to your product. HAVI is participating as an exhibitor on Booth G40.

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European Foodservice Summit Zurich, Switzerland, Europe SEPTEMBER 27-28, 2016The number one European platform for the restaurant industry. Issues they discuss are trendsetting and on tomorrow’s agenda. Together they have created a think tank to analyse the most important changes in the industry as well as an annual forum where all participants may share their thoughts on a regular basis. The people who join the summit are the industry leaders who shape the European restaurant landscape for the future. HAVI is participating in this event as an educational partner/sponsor.

E VISIT HAVI.COM TO LEARN MORE

SIAL Paris Paris Nord VillepinteParis, France, Europe OCTOBER 16-20, 2016Are you ready for this amazing journey? From 16th to 20th October 2016, the world’s largest food event

will welcome visitors and exhibitors at Paris Nord-Villepinte exhibition centre for a taste experience full of new discoveries. The place to be... SIAL Paris is the world largest kitchen where new trends spring from and where Planet Food inspires the food of today and tomorrow. It is also a platform without borders for building new partnerships and invests other markets. Yes, you can conquer the world! Everything is in place to welcome the future players at this exceptional event.

E VISIT HAVI.COM TO LEARN MORE

33. German Supply Chain Conference InterContinental and Pullman Berlin SchweizerhofBerlin, Germany, Europe OCTOBER 19-21, 2016 Today the International Supply Chain Conference is the most important annual logistics event in Europe. It became the central meeting point for managers in Germany. Additionally, more and more international guests join the event in order to benefit from knowledge sharing and focused communication.

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Emerging Technologie Produce Business Benefits and Talent Challenges MHI Solutions MARCH 2016 Ashley Everson, Vice President of Human Resources, and Pan Chen, Sr. Director of Supply Chain Services, comment on the emerging technologies that are impacting supply chain jobs and changing the skillsets professionals need to succeed in this new environment.

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Packaging for Food Safety in the Middle East Food Manufacturing Journal - Middle East FEBRUARY 2016 Gary Esguerra, Sr. Director of Sustainable Supply Chain & Quality Systems for HAVI APMEA, discusses why companies must be willing to embrace new packaging technology to strengthen food safety.

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