Procurement & Supply Chain | HEINEKEN
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We Make Things Happen
ith a dedicated team of almost 1200 staff, four breweries, and an extended portfolio of beer and cider brands, including Heineken®, Birra Moretti®, Strongbow®, Old Mout®, HEINEKEN Romania is the brewer with the most extensive footprint in the local market. HEINEKEN is both a growth and a peopleoriented company, and the pandemic has been a catalyst for enhancing its culture of care for employees and for the communities where the company operates. With extensive E2E Supply Chain experience in international FMCG Companies, Federico Agressi joined the HEINEKEN company in 2008 and has represented the organisation across Europe and Africa. Now residing as the Romanian Supply Chain Director, he provides an insight into how the business has adapted during the pandemic. Hi Federico, supply chain can cover many different areas of responsibility. What are your main responsibilities? Supply Chain, in HEINEKEN, means the E2E operations covering production (four breweries here in Romania), logistics (inbound and outbound, warehousing and transportation), Sales and Operational Planning, Customer Service, and of course the support functions which are centrally located: SHE (Safety, Health and Environment), Engineering, TPM (Total Productive Management, the methodology followed in HEINEKEN for continuous improvement), Quality and Technology. Basically, the mission of this team of
around 650 people is to serve the business, every day, with excellence in everything we do. We produce, store, transport, and deliver our products to customers both in Traditional Trade (retail shops and HoReCa) and Modern Trade. We also develop new products based on the indication from the business, using the NPI (New Product Introduction) methodology. And, of course, we do all this with a constant focus to quality (products and services) and performance (costs and efficiency). Some time ago, in one of my previous assignments in HEINEKEN, we crafted a slogan for the Supply Chain function: “We make things happen”. Well, I think this statement is always valid and represents what this fantastic Function does, every day. You operate a centrally led team covering four separate breweries. What advantages does this structure offer? First of all, working in a company like HEINEKEN, which operates breweries, malteries, cider plants and other production facilities in more than 70 countries offers a unique opportunity to share experiences and learn from others, in a very efficient and effective way. With so many operations running it is very likely that, once one of us experiences a problem or a challenge, somebody else has already faced it somewhere else and is willing to support. This provides speed in execution, prevents that everyone reinvents the wheel and, even more important, contributes to building a culture of sharing and helping each other.
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Procurement & Supply Chain | HEINEKEN The same concept applies for us in Romania: having four breweries means that the teams can support each other when needed; the central departments, at the same time, ensure that there is uniformity of approach and standardisation in the way of working. A production footprint with several breweries also helps in terms of business continuity and optimises the route to market and proximity with our customers. The covid pandemic has caused significant operating and supply chain challenges. Your business is heavily geared towards the retail sector which has softened the impact on volume. That being said you have still noticed significant effects. What challenges has the pandemic created for your function and how have you adapted? In the context of the Covid-19 pandemic, we quickly mobilized around two objectives: our colleagues’ health and safety, and business continuity. If we talk about the health of employees we did not compromise, especially since there was a lot of uncertainty and it was necessary to give colleagues the psychological safety that we would take care of them, which we actually did. In Romania, as mentioned, we have four breweries; all of them were fully operational, of course after setting up the necessary protocols to protect our colleagues from the potential effects of the pandemic. From March-April to August-September we faced a major change in demand, which in the beer industry is normally very difficult to manage. You cannot decide to produce more beer
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overnight because this is a product that needs time. Any unexpected peak in demand may cause supply challenges. We also faced a huge shift of demand from the HoReCa (food service/hotels) segment to the retail one. So, we needed huge volumes of products in different pack-types, which of course put pressure on Supply Chain. In HoReCa we mainly sell draft beer and returnable bottles, and in retail (and more specifically in Modern Trade) we sell nonreturnable bottles, cans, and PETs; the beer (i.e., the liquid) is the same, but the mix of brands and packaging is very different. From one day to the other, one channel temporarily collapsed, while the other sky-rocketed, and this has required Supply Chain to adapt quickly: we build planning scenarios for the demand, we redefined the stocks of materials and warehousing capacities, we became even more flexible in managing the changeovers on the packaging lines, and at the same time the great focus from our people ensured that we even increased our lines’ performance versus the previous year. Another important aspect to underline is that the Covid-19 crisis also had an impact on profitability, at least for the brewing sector. There is a lot of talk about retail sales offsetting HoReCa sales: while this might be true in volumes’ terms, for sure has not materialized in terms of profits, due to the different margins of the channels. Therefore, the change in the mix of sales channels, combined with the extra costs necessary to protect our people from COVID, resulted in a year – 2020 - with very high challenges for profitability. Federico Agressi 37
Procurement & Supply Chain | HEINEKEN Your ability to adapt to the ‘new normal’ and find innovative solutions is partly down to effective collaboration with suppliers. How important have key strategic supplier relations become during this period and do you believe that relationships that were already strong have now become stronger during this experience? For sure, a period like the one we have experienced in 2020 has strengthened the relations with the strategic suppliers, while at the same time has also showed us which ones we could really rely on, in case of challenges or emergencies. As an example, I would like to mention the technical support on the production lines
that, during the pandemic, when possible was ensured via physical presence of the suppliers’ technicians (overcoming the difficulties, by the way well understandable, linked to the various travel bans in the various European countries), and in some other cases via remote assistance using the latest digital technology like smart-glasses, which allows the expert to “guide”, in remote, the local technician carrying out the specific activity at the brewery. As a general comment out of my personal experience, I can say that a good collaboration with suppliers is key in order to win in the market; it is not only about reducing costs, but also mainly about service levels, reliability, quality of the products and services, and of course “Total Cost of Ownership”.
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The Covid-19 pandemic has only accelerated these trends and made them even more visible. Another critical cog in your battle to adapt and thrive during the pandemic has been your people. HEINEKEN places great emphasis on the health, safety, and well being of its staff and the communities that it serves. What programs have been rolled out during this period? The support of all our colleagues was our main focus, aiming not only to create a safe environment by providing all necessary protection equipment and safety framework, but also enhancing our power as a team that takes care of each other, united by the same values and priorities, so that together we can
easily overcome the difficulties brought by the pandemic. Apart from setting up the highest standards in terms of protection (physical distance, masks, disinfectants,) under the concept of #WeAreHEINEKEN #StrongerTogetherwe have developed a 360° internal engagement plan, designed to offer constant information, drive engagement and provide with wellbeing initiatives (a program, accessible also via Internet so basically available 24/7, which covered aspects of physical, mental and emotional wellbeing, and also offered professional support via telephone for the ones that wanted to share their difficulties and required support). Also, we wanted to help our colleagues with children, in making sure they have access to education.
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Procurement & Supply Chain | HEINEKEN We donated more than 300 laptops for the children of our employees to support with the online education in the pandemic context, within the HEINEKEN for Education program. But we strongly believe the power of being united, stronger as a team, goes beyond our company and should also be reflected in the communities in which we operate. Supporting our communities is an important pillar of our sustainability and responsibility strategy, 2030 Brew a Better World, because we can thrive only if the environment and our communities thrive. While in the good times, we like to share joy and success with our communities, when they are facing challenges, we want to contribute and overcome it together. Determined to join the efforts against the Covid-19 pandemic, we developed an external program Stronger Together. Support for Communities, and we donated 1.5 million RON to the Romanian Red Cross and 5 hospitals in our main communities (Mures, Ciuc, Craiova, Constanta, Bucharest). ‘Brew a Better World 2030 - Raise the Bar’. HEINEKEN has always been seen as a proactive member of the corporate sustainability world. With Globally led initiatives that are executed locally you continue to ‘Raise the ’Bar’. What role does the supply chain function play in driving many of these initiatives? Sustainability has always been an important part of HEINEKEN, and our Brewing a Better World strategy has had a profound
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role in our business in the past decade. We are proud that this year we launched our new global strategy Brew a Better World. Raise the Bar 2030, which sets our global sustainability and responsibility ambitions, in the company’s next chapter of growth. I would like to mention just a few of our main initiatives and priorities, and of course, I will start with Safety first. We make no compromise when it comes to safety and we are constantly undertaking efforts to maintain and improve our safety standards and results. Our motto is “no job is so urgent that it cannot be done safely”. In HEINEKEN, we apply a set of 12 Life Saving Rules, we have implemented a system of Behavioural Safety Observations, all our company cars have installed a telematics system with the objective to monitor the driving behaviours, we are running a program for continuously improving process safety, we have installed, in our breweries, more than 3 km of physical barriers along the pathways to protect people from the interactions with forklifts, etc. On the environment initiatives, the water and CO2 emissions pillars play an important role. Water is essential for life, and at the same time is the main ingredient of beer (95%); it is clear that, for any brewer, reducing water consumptions is a priority. In HEINEKEN Romania we have continuously decreased water consumption in our operations over the years, and on the other hand we are aligned with HEINEKEN global target of 2.6 hl/hl in water-scarce areas, and 2.9 hl/hl in other areas. HEINEKEN will also maximize the quantity of water reused, through reclamation plants.
As for our CO2 footprint, in Romania, all the electricity we use in the processes comes from renewable sources; at the same time, in transportation we have reduced CO2 emissions through a more efficient routing and the use of an optimized algorithm for trucks loading. HEINEKEN has announced that by 2030 will become carbon-neutral in production and by 2040 in the whole value chain. In Romania, we have prepared a carbon neutrality roadmap “to get there”. This will require significant investments and collaboration with partners. It is an exciting journey ahead with HEINEKEN raising the bar with the new global commitments on the environment, social sustainability, and responsible consumption on a path to a net zero, fairer and healthier world. Finally, what have you learnt about your function and the business over the past challenging months?
Indeed, this period of “disruption” also allowed us to learn a lot of things. First of all, it is about the power of feeling part of a community: while for long times we were physically distant, it was even more important to build a common virtual space for “psychological safety” for all employees. Then, the importance of being agile and flexible: while of course making plans remains an essential part of our job in Supply Chain, we have also understood that it is fundamental, in order to thrive in these difficult moments, to be fast to adapt to the almost daily changing conditions. Last but not least, I think we have all understood how essential it is to make space, in our life, also for “quality time” with our family and friends; these moments can recharge us both physically and mentally and help us provide a better version of ourselves when at work. 41