From ONG Forum 2020: Building a Resilient Supply Chain
By Michelle Pelletier Marshall, Women in Agribusiness Media (December 1, 2020)
At the recent 2020 Organic & Non-GMO Forum, a sister event to the WIA Summit, Ahmet Hepdogan, vice president of procurement at Ferrara Candy Company, spoke to “Building a Resilient Supply Chain” through his experience in supply-chain roles with large corporations. Hepdogan is also a long-time supporter of the Organic & Non-GMO Forum and holds a seat on its advisory board.
Read below for an edited version of his presentation, and also see a video snippet at: https://www.youtube.com/watch?v=MT3gX6NpuxM&feature=youtu.be. To note, registration is still open for the Forum where one can get access to all the recorded sessions and message with all attendees on the virtual platform, which is available for a year.
What Are the Risks to our Resiliency?
I'm really excited to talk about this topic. There are a few reasons why. One is without a doubt, it's been an interesting year for all of us in food, beverage, and various different industries. We're all trying to learn and adapt very quickly.
But first a little about me: I've definitely been committed to the organic and non-GMO industry for a while now, working as a consensus builder for the business. Working at a consumer packaged goods company, I have the background and experience from seed to fork. And it's really, really important to understand a supply chain in detail.
This influences how I work and how my team works. In our supply chain at Ferrara, I have a deep and genuine understanding of how our decisions and interests impact the entire supply chain, down to the farm. In this presentation, I will discuss more on a concept called the supply chain ecosystem, and also the takeaways as a result of COVID-19.
I adopted the view that risk is all around us everyday. And it's in every corner of the globe so I sought to make it a part of every enterprise I have touched. It's a mindset really. We think about all that could go wrong and impact our supply and our business, and our suppliers’ businesses, and then build strategies around how to mitigate some of that risk.
So how do we do that? There's various different parts of risk -- there is antitrust corruption, there’s modern day slavery, employee rights, diversity, health and safety materials handling, irresponsible marketing and more. In these examples, no one is purposefully trying to hurt us, but the actions are hurting, and at some point somebody is going to get hurt by it. Soon enough, you have to acknowledge that, or you'll make the news if you don't. Another area of risk in the last 10 to 20 years is cyber security, such as business continuity, for example, or IP infringement. Additionally, there is environmental stewardship, where we really need to be in the driver's seat to be able to make some meaningful changes.
Aside from the categories I shared, commodity risk is a very big risk for our business, and reputational risk is also front and center with social media. And brands are being very careful about this. All it takes is somebody posting an image on a social platform with the proper hashtag, and it could go viral.
And business contingency – this is extremely important. If a natural disaster struck, we cannot afford to not have our brand on the shelf. Do we have the proper sourcing strategy to be able to mitigate that risk?
The Supply Chain Ecosystem
Oftentimes companies take a look at these issues in silos, but not necessarily together within an ecosystem mindset. Perhaps the biggest mistake companies make is that they only focus on legacy issues – issues that have hurt them in the past, with the notion that history will repeat itself. But to really get the full picture, we need a constant pulse on a lot of the issues that we think are either emerging, or on their way. You need to be able to switch between the obvious risks and not so obvious risks.
It's really important to run scenarios by coming together as a business, to say, What if this and this happened at the same time? Can we weather that storm together? What are the really important topics? Do you have the right contingency planning in place? At Ferrara for example, we made it a more statistical approach, we use Monte Carlo modeling for our risk thresholds. This actually allows us to run scenarios like crop disasters, combined with a few other things, like an economic meltdown, or possibly a pandemic, or God forbid, a war. What would we do in our supply chain to quickly pivot and be agile and still be operational when we face these unknowns?
It’s empowering to think that we have the ability to address even the most extreme scenarios. It takes some creative thinking, alignment with company leadership, and understanding your place within the supply chain ecosystem. In business, our ecosystems involve procurement, quality assurance, food safety brand teams, our suppliers, and farmer partners as well. It’s very important to acknowledge that we are ultimately all dependent on each other, that this is not an I win, you lose – we really need to think of a win-win-win solution.
Also, we need to look both internally and externally to keep a pulse on the decisions being made throughout the ecosystem. A lot of organizations look internally at structure, people, and processes and think the job is done. But in reality, if you look at the profit and loss statement of a company, at least 50 percent of that or more will depend on decisions made by its suppliers. Your business's profitability heavily depends on its partners. Procurement has an intrinsic role to constantly remind our organizations that there is this ecosystem out there of farmers, raw materials, suppliers, and others.
The Lessons of COVID-19
It wouldn't be the 2020 year if we didn't discuss this pandemic and its impact on our professions and our world. Let me start by saying COVID-19 is still here. And it's ongoing. And change is also ongoing. I think we learned that we were doing a lot of good things to ready us for handling COVID. We had some good strategies in place: multiple sourcing for example, instead of single-sourced ingredients. We did some very strategic things early on that really paid off. And because of our risk planning at Ferrara, and the relationships and culture we have build with our suppliers, and our emphasis on contingency planning and communicating risk to our stakeholders, we did not experience a disruption in our supply chain.
And we continued to deliver on-time in full to all of our manufacturing plants during the early phases of COVID-19. Looking ahead, I think we're entering into a new era in supply chain in which we need to consider more domestic dependencies too. We've expanded and globalized our sourcing strategy in the past, but we also realized our contingency plans needed to have a healthy balance between international and domestic as well. As we looked back and thought about how we might plan for another pandemic, there are several questions that come to mind, including: What kind of leavers came into play? And what future leavers can we pull as an organization? Are we diverse enough to weather the storm that might hit next?
And the more we share during times like this, the more resilient we become together, as an industry. Let me leave you with what I think are the biggest traits companies will need in the future. Number one, flexibility and agility. And do you really understand what that means to your business and how you actually behave in an agile environment? The second thing is that we will need to be willing to change something that's been done the same way for a very long time. Third is, how quickly can you really change so when it comes time to run, can you really run?
About Ahmet Hegdogan
Ahmet Hepdogan is the vice president of procurement at Ferrara Candy Company. Ferrara’s portfolio of iconic brands includes Brach’s, Lemonheads, Black Forest, and Trolli. Ferrara Candy with annual sales of $1 billion is in a leadership position in the non-chocolate confectionery segment and is headquartered in Oakbrook Terrace, Illinois. Prior to joining Ferrara Candy, Hepdogan held supply chain-related positions at C. H. Robinson, Global Risk Management, US Foods, and ARYZTA. Hepdogan has a Master of Business Administration from the Carlson School of Management, University of Minnesota. He is a native of Izmir, Turkey, and currently resides in Chicago.