Dialogues

The Perfect Supply Chain: Fact or Myth?

Interview with Tonet Rivera, Senior Vice President for Global Supply Chain, Mead Johnson Nutrition

Some say the perfect supply chain is unattainable, others say it is even impossible to achieve. But one supply chain professional believes the perfect supply chain has actually been in existence for over 100 years.

“A company that sells its goods as quickly as it makes them, and delivers as soon as a customer demands for them, has pulled off the perfect supply chain. Obviously, the energy industry has been doing this since it started. Utility companies do not need to store electricity in warehouses, and customers just need to flip the switch whenever they need it,” explains Mr Tonet Rivera, Senior Vice President for Global Supply Chain, Mead Johnson Nutrition.

In this issue of Supply Chain Asia magazine, Mr Rivera shares his thoughts on the current supply chain landscape, feelings on winning the Individual Award in the last SCA Awards show, and love for flying (despite his intense fear of height).

1. As a 35-year supply chain veteran, you must have had plenty of experience and exposure in the industry. Can you share with us one of the most important things you’ve learnt during your career in supply chain?

One of the most important things I learnt is the concept “Sell One, Make One”. In order for a business to be successful, it needs its cash flow to move fast. The company must be able to sell as quickly as it makes the goods. While it is important not to run out of stock to meet customer demand, having excessive inventory often translates to low cash.

I remember one time when my manager shared an example with me. He told me to imagine if the company has decided to raise my salary because of my good work but they do not have enough cash in the reserves. To compensate, the company decided to award me with one-year worth of toilet paper supplies. Even if the cash value is the same as the proposed salary raise, anyone in the position would prefer to get cash in hand. It just does not have the same value as pellets of toilet paper supplies even if they cost as much. The same applies to a business. Having excess of inventory at the expense of cash will kill the business.

2. Why did Mead Johnson decide to move its regional headquarters to Singapore in 2012?

We decided to move our regional headquarters to Singapore due to its financial efficiency, and deep talent pool. In addition, we are attracted to Singapore’s protection of intellectual property, the telecommunications capability, and the overall efficiency of the entire country.

Four years on, it is still a good decision and we have absolutely no regrets.

3. In your opinion, what are some of the biggest challenges Mead Johnson face when it comes to its supply chain operations, considering the company deals with manufacturing of baby formula?

How do you manufacture infant formula in an aseptic environment, in a world that is laden with microbiological and food safety threats? That is our biggest challenge. Our quality standards are truly leading edge, but that is not our real strength. Our pharmaceutical heritage, our long and relevant experience in manufacturing infant and children’s nutrition, and our commitment to science, are our highest strengths.

We perform thousands of tests on our supplies, manufacturing processes and our finished goods to ensure they are free from all food safety threats, biological hazards, and foreign matter particles. We are keenly aware that for many infants, their sole source of nutrition is the product we make in our factories.

4. What is your take on the current supply chain landscape in Asia in terms of technology adoption? Is technology adoption growing at an acceptable pace?

The real question is, “What is acceptable”?

During my time, Windows 95 was a technology marvel, a terrific improvement on Windows and DOS. Yet today, the younger generation is baffled by how we connected online then (“No WiFi, Dad?!”), how we had to turn the monitor and the computer on separately, how there was no touchscreen, and how we could only log off when the archaic statement, “It is now safe to turn off your computer”, flashes on the screen.

I believe technology is moving, and will continue to move as fast as the consumers want it to. If they want overnight delivery, we will find a way. If they want imported product from Europe delivered to their home in Penang, we will find a way. Accepting payment through mobile phones, keeping track of their accounts, segmenting their preferences and understanding consumption patterns are the key technology challenges now.

I also believe that supply chain is the last big frontier in competitive advantage – predicting and harvesting demand, accelerating the order-to-cash cycle, finding a gold mine in cash within our inventory levels and fulfilling orders within an unimaginable time constraints. These are all going to be technology enabled.

Ultimately, we will have to deliver on these demands, even when sometimes the consumer does not even know what he or she wants yet.

5. Reports have shown that Mead Johnson is losing market share with increase in competition, namely from Nestle and Danone. Can you comment if this is true? And how is the company managing this pressure?

We are either number one or a strong number two in market share in a great number of the countries we operate in. We believe Mead Johnson Nutrition offers a superior product that consumers are willing to pay a premium price for.

Sure, there has been an explosion of brands and manufacturers in the last three to five years, and that has intensified the competition tremendously. Many of our competitors are in the dairy industry, where margins are lower and products are priced at commodity or mass market levels. It can be palatable for them to go into the infant nutrition category with less science and a lower price point, than to compete with Mead Johnson Nutrition’s scientific heritage and strengths.

However, we believe that we understand the nutrition needs and requirements of infants more than any of our competitors, and we compete at that level.

The markets are segmented, and we do not necessarily compete where companies like Nestle and Danone do. Instead, we just want to focus on delivering on our customer’s needs and expectations.

6. In your opinion, is there sufficient supply chain talent in the region? Why or why not?

Yes, there is. There are certainly a lot of very smart people in Asia, and there is also a lot of expatriate talent in the region. The key is to leverage and deploy talent intelligently – and that is the job of supply chain leaders like me. It is important that we put people to work constantly pushing that leading edge forward, that we upset our own paradigms, and that we challenge existing success formulae and practices. There are tremendous opportunities to change paradigms in supply chain.

Inventory is evil, not good. Capacity is better than inventory. It is a lot more complicated now than running a shop floor or negotiating a supply deal.

7. What does winning the Individual Award for Supply Chain Professional of the Year (Pharmaceutical) in SCA Awards 2015 mean to you?

I felt proud, of course! I was very excited to be recognised. I kept looking around the room at all these world-class supply chain professionals, who are from some of the most famous logistics, supply chain and information technology companies in the world. It was overwhelming to be part of the crowd, not just as a participant but one of the guys with a trophy. It was an incredible feeling.

8. It has been known that you are an avid pilot. What appeals most to you about aviation? What is next on your bucket list?

I am actually deathly scared of heights, but I have always wanted to fly a plane. I am especially challenged by how to leverage every aspect of aerodynamics to squeeze out the most performance from an airplane. I have about 40 hours of aerobatic training.

Some would call it stunt flying, but I feel that is misleading. It is about flying into a loop or a hammerhead, meticulously following every exact procedure for control and power, and you roll out of the maneuver at exactly the predicted altitude, airspeed and heading. I would compare it to golf by competing against myself using a standard or a benchmark, and feeling the need to best myself each time.

Writing a book is definitely on my bucket list. My book will probably be based on flying, airplanes, optimising opportunities in life, and my children. I am still thinking of a title. Unfortunately, Antoine de Saint Exupery beat me to it. That is a tough act to follow.

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