‘If there’s one thing I struggle with it is decisions made by people who haven’t understood the questions they have been asked,’ says Paul Reilly, strategy manager, global supply chain at tobacco giant BAT.
He swiftly emphasises that this is a general observation, not a criticism of any particular management. When we spoke, Reilly was just off an 11-hour flight to Brazil attempting to tackle ‘the challenge of globalisation in a company that is still regionally focussed. I’m in Brazil to talk about standard processes in supply chain management, and looking to get sign-off for a global mandate
‘But talking about processes involves defining systems and that can become very political and frustrating. I want the best answer quickly – I don’t want weeks or months of political meandering to get the right answer.’
BAT is trending towards centralisation – first regionally, then probably at global level. But it is a painful transition.
‘Regionalisation creates even more powerful groups with more complex influences, more powerful stakeholders. This can be a barrier to the next phase of centralisation or globalisation. It’s a tricky line to walk. If you get it right there can be huge success, but if you don’t…’
As a business, BAT is going through a lot of change and this will continue for at least the next five years. ‘We’ve got to get used to managing change,’ Reilly says.
He says the biggest issue is that the supply chain is still immature. ‘There’s a long way to go to gain credibility in the right parts of the business.’ The issues range from pure logistics to the use of analytics and arcane but vital areas such as tax efficiency. ‘I’m a great believer in data-based decisions – the data and the analysis drive the work. But people don’t want to go through all that,’ says Reilly.
Coming as he does from a factory environment where there are a lot of everyday rather than planned decisions, Reilly is acutely aware that ‘not everyone understands the difference between planning and execution’.
‘Planning is the most fundamental part. Look at the SCOR model, for example. But people’ (and Reilly clearly includes business journalists here) ‘focus on trucks and sheds – things they can see and touch. When did anyone last write about supply chain planning? (See planning feature p44 – Ed) It’s just not exciting – but I need to be able to market the importance of supply chain planning to other parts of the organisation.’
There are some fundamental attitudes that have to be challenged, says Reilly, and cites an example some years ago from the Ollie Wight organisation. ‘They reckoned that in UK companies, a third of products make a 200 per cent gross margin, a third make no margin, and a third lose 100 per cent. So the average is 100 per cent which looks good. But the Japanese structure their business in a different way, so that all products should have the same margin.
‘And you can guess where, in our model, the flair of the people or the company is used – on the products that already have healthy margins. If we redeployed that to the products that are currently losing margin, profitability would be transformed. But at the moment, flair is mis-deployed, allowing poor planning or execution in the other parts of the business. In the years to come, this sort of inconsistency will be the downfall of many firms because the key thing about the supply chain is that it can’t tolerate inconsistency.
‘So what to do? It’s completely unacceptable that we don’t understand our true costs. We don’t apply the segmentation we talk about, we don’t typify our supply chains in terms of cost, we don’t work out the costs of serving each customer. If we knew all this the value we could drive would be tremendous.’
More generally, Reilly says: ‘Supply chains often feel put upon by the demand side. We need to collaborate more, pass back the constraints so that everyone understands them early in the process.’
- Graduated in Mechanical Engineering from the Universityof Birmingham. Reilly’s first post was in production management with Plessey Radar.
- Moving around major industrials he experienced the earlyapplications of IT to industrial processes, leading to a position with software vendor Fourth Shift.
- Moving to cosmetics company Oriflame, he helped set up a factory in Poland and then became head of supply chain, based in Brussels from where he moved to drinks company Diageo to work on its global supply chain collaboration programme.
- Reilly joined BAT (British American Tobacco) two and a half years ago.
