Chris Webster described the selection of this year’s Overall Winner as ‘the toughest I’ve seen during Capgemini’s years of involvement in the Awards’, a sentiment echoed by the other judges. For obvious reasons, the Overall Winner has to come from one of the (five) industry sector winners, but the judges also like to nominate entries for second and third places – this reflects the fact that different sectors are at differing levels of supply chain maturity, and thus that a runner-up in one category may in fact show ‘excellence’ to a degree not evinced by the winners of some other categories, so several entries that weren’t sector Winners were considered for ‘places’.
To reduce the list of possibles, the judges focused on entries that had been placed in the ‘top right’, ‘adaptive’ box of the NVC Index. This left us with Entertainment UK, Computacenter AG, Reckitt Benckiser Healthcare, and Rexam Beverage Can Europe & Asia from the sector winners, and also O2, runner up to EUK, in the running for a place. Computacenter was described as ‘very interesting, but perhaps not in the same league’. The judges were also slightly concerned that admittedly impressive performance results were being achieved through an excessive deployment of capital and resources. Reckitt Benckiser is ‘a wonderful story, but it is very largely focused inside the factory and so doesn’t display the range of excellence that we would hope for in an Overall Winner’.
That left Rexam, O2, and EUK – and clearly O2 can’t beat EUK, its own sector winner. At one point it did look as though the judges might have to revisit their previous decision between these two – in which case they might have been debating still. As it was, the earlier decision stood, and O2 was awarded third place in the Overall Winners category. So, it’s down to penalty goals between Rexam and EUK. Both, the judges noted, had exceptionally demanding and powerful customers (the likes of Coca Cola in the one case, stores such as Tesco in the other) and both are potentially squeezed between these customers and equally powerful suppliers (aluminium processing, and entertainment product development are both, despite the existence of independents, dominated by a handful of truly global companies) and both work tirelessly and creatively to demonstrate to customers and suppliers the value they can add in the supply chain.
In the end, just a few factors swung the decision. The judges noted that while EUK is a relatively new company in a relatively new industry, Rexam has had to achieve what it has from ‘a mixed up bunch of businesses’ with legacy issues and very different cultures. Rexam is also impressive for the way that it is reaching past the direct customer (the firms who fill the cans) to the customers’ customers – the retailers (it would admittedly be hard for EUK to reach beyond its direct retail customers to the end users). Thus they are recapturing market power, and with their aspirations towards serving retailers’ promotional and other needs with extreme agility (the ‘one day can’ concept) they are converting an essentially commodity business into a very responsive, market-driven operation. EUK is, of course, entirely market-driven, but then they have to be – Rexam could have opted to bumble on as a low margin metal presser, but instead has used its position in the supply chain to create a really successful business. So, in the end, the virtual white smoke went up the virtual chimney and the Overall Winner of the European Supply Chain Excellence Awards 2005 is Rexam Beverage Can Europe & Asia. What are the factors that make Rexam such an outstanding practitioner of the supply chain arts, and a winner where only a few years ago it might not even have made a shortlist?
The key lies in the new supply chain organisation that has been created over the past four years. Crucially, we think, this combined packaging industry experts with individuals from other, more customerfacing, industries such as automotive, selected not just on capabilities but on their attitudes towards change.
A can is a can to the youth in the hoodie down the shopping mall, but actually Rexam’s 15 can plants and four ‘end’ plants across Europe support 170 customers with a range of 14 different-sized basic products in a highly seasonal environment, and one where true product diversity, for example the requirements for corporate and promotional labelling, is increasing dramatically. This stresses both Rexam and its supply base, and the solution lies, in part, in very tight inventory management, which can only be achieved through healthy partnerships with suppliers and customers (both of whom, as noted, tend to have considerable ‘clout’). Rexam’s European supply chain team has been designed around key business processes – the procure-to-pay cycle, Sales & Operations Planning, and order fulfilment, with a clear governance structure between the central supply chain team and the operational (factory based) teams, and with a cross-business-unit Supply Chain Council ensuring that best practice and innovation are shared across the total organisation.
S&OP is sophisticated, and supported by key account managers who have a real understanding of market volatilities and work closely with customers to define appropriate stock levels. At the same time there are clear borders between central and local scheduling, which keeps the system honest. On the buy side, Rexam has adopted leading practice from the automotive industry, and are actively promoting partnerships with suppliers that are driven by total cost (to both parties) rather than price. Long term contracts based on performance, supplier audits and awards, and collaborative supplier development are commonplace in many other industries, but are not often so successfully introduced in an industry where supply is restricted to global giants and price determined by international commodity markets. The cash-to-cash cycle has been improved by reviewing sourcing and inventory decisions plant by plant, and further developments such as e-portals are improving collaboration with suppliers and customers even further while enabling the introduction of techniques such as Vendor Managed Inventory.
In logistics, providers have been consolidated from 100 down to seven regionally based partners, and Rexam has worked with these to develop on-line booking to provide visibility and tackle problems of arrival times and demurrage charges. Of note also is Rexam’s promotion of rail freight to serve Red Bull in Austria, where the ‘Maut’ regime and rising fuel prices were threatening competitiveness. IT deployment is thorough and appropriate, based on SAP ERP as a backbone with further focused solutions for particular elements of the business strategy, but it is clear that IT is the servant, not the master, of the strategy. In pursuit of the ‘one day can’ an online graphics package is being developed to allow customers to configure a can, which means configuration will generate shared product data as a basis for commercial negotiation. These are European Awards, but the judges were also interested to learn of Rexam’s activities in emerging markets such as India and China. Typical costs of a new canning factory are in excess of e30 million, reflecting high degrees of automation, and this is prohibitive in many new and risky markets. Rexam’s supply chain team has ‘challenged sacred cows’ (if one is allowed to say that in an Indian context!) with lower tech, higher manpower concepts that reduce the cost of entry to less than e10 million. A formal citation might read ‘Rexam have demonstrated an understanding of the adaptive supply chain and have turned this into a pragmatic route map. This route map is being implemented and is delivering business benefits through a structured portfolio of projects. They adopt a business driven perspective and understand the need to collaborate with both suppliers and customers, while appropriate IT is being implemented to support the business needs’.
That sounds rather dry and dusty. In reality, Rexam is an exciting and joyful proof of the real impact that Supply Chain Excellence can make even in industries that are not obviously ‘sexy’. The Overall Winners of the European Supply Chain Excellence Awards 2005 are an example for us all.
