Five Ways to Optimize Supply Chain Management

Improve collaboration between manufacturer/supplier and retailer for demand data driven
forecasting and inventory management.
Oct 31, 2011Ravi Sankar, practice director of the Consumer Products Group for HCL Technologies

The supply chain of the extended enterprise has become an increasingly complex
ecosystem of people, processes and technologies.
Once exclusively comprised of internal systems, most supply chains have greatly
expanded due to the proliferation of computer networks and Internet tools and
technologies during the past two decades. These innovations opened the door for true
collaboration between partners, distributors and suppliers that extended well beyond the
four physical (and virtual) walls of the enterprise.
The most recent technology advancements -- the widespread usage of Web 2.0 tools and
social networks, on-demand software, cloud computing adoption and the ubiquity of
mobile technologieshave served to present further challenges (and opportunities) for
optimal supply chain management.
Manufacturers have been forced to evolve or perish when it comes to optimizing the
processes as well as navigating the new tools and best practices for supply chain
management. Most have become acutely aware of the challenges and trade-offs that
affect their increasingly complex, competitive and transparent supply chains. At any
point in time, an optimized supply chain stays lean, manages costs and perhaps most
critically, responds instantaneously to even minor fluctuations in demand.
While there is no single playbook to ensure success in an incredibly dynamic global
market, here are five tips that should be considered for the manufacturing enterprise:
1.Think Globally but Act Locally
This is not only a geographic reference; but it is also an important point to consider
when thinking strategically about supply chain or value chain planning. Companies
increasingly must think in terms of global opportunities for procurement of goods AND
services, and when considering the global needs of the corporation. Manufacturers
should consider multiple channels and determine the optimal levels of inventory within
the echelons of the supply chain process. This is also critical to consider carbon footprint
levels and ensure the greening of the supply chain. However, during the execution of the
supply chain it is important to optimize locally to maximize your investments in critical
resources: infrastructure, assets and technology.

2. Focus on Core Strengths and Outsource all other Activities

Many organizations try to do too many things or don't realize that they can outsource
repetitive or tasks or one-off projects (for e.g. determining the optimal distribution
network; the payment and audit of freight bills or supporting enhancement of its
information systems). Quite often it seems as though an organizations' internal
resources are able to do better job in the short run. Most often, by relying upon a
specialized third-party provider, a better value will be realized in the long term. Focusing
on your organizations core competencies will help you grow your business.
3. Improve Collaboration Between Manufacturer/Supplier and Retailer for
Demand Data Driven Forecasting and Inventory Management
This will help organizations reduce inventory, improve fulfillment rates and product
availability at point of purchase and ensure a lean supply chain improving margins and
profitability. Today, technology provides myriad opportunities to collaborate, there is a
proliferation of data available to be mined and advances in computing power and
connectivity allows us to test for optimality in ever increasing areas.
4. Utilize Mobile-Based Technology
This technology can help improve field sales, merchandizing and marketing, and enable
direct services to the consumer (through customized location-based coupons or services
that improve employee productivity in the field). Providing information such as
provenance, origin, item contents and specialized information on demand about
sustainability, local content or manufacturing methodology enhances the brand and
allows companies to connect directly with the consumer.
5. Build a Responsive Supply Chain
Utilize source data such as POS sales, as well social media information to identify trends
and demand changes much earlier and enable your supply chain to respond faster to
increase sales, improve service levels and reposition inventory to maximize true benefits.
Multi-channel programs will change expectations from supply chain
forecasting/planning paradigms to building responsive supply chains.
http://www.industryweek.com/planning-amp-forecasting/five-ways-optimizesupply-chain-management

HISTORY
Our mission is to be your expert partner in managed services and consulting solutions across the global business
supply chain, delivering value and growth from source to consumer. We reach beyond categories, industries,
technologies and suppliers to leverage our expertise in an unbiased and impartial approach that is focused solely
on your needs. Today some of the world's most respected brands rely on our packaging expertise, marketing and

business analytics, supply chain services, promotions management know-how, and recycling and waste solutions
to deliver a competitive advantage for their business and an unshakeable respect for their corporate and
environmental program impacts.
HGS was born in 1975 as Perseco, a small business that bought packaging for two McDonald's distribution
centers. Throughout the 1980s we increased our packaging services presence in North America, Asia, and
Europe. In 2011, we increased our ability to provide broader integrated packaging solutions by launching our
Corrugated Packaging Program. This program is consistent with our desire to bring a proactive, strategic
approach to customer relationships, and it enables us to better service customers in the single largest packaging
category (corrugate), with a global spend of over $80B. During this same year, we also announced HGS'
acquisition of Packaging & Technology Integrated Solutions, a recognized leader in packaging consulting and
resourcing across the global packaging value chain, bringing significant expertise and capabilities in professional
services to the HGS portfolio of packaging solutions. Today, our full suite of packaging services, consulting
solutions, and products go to market under the name Packaging Technology Integrated Solutions, currently
sourcing more than $3B annually for our customers.
In 1990, McDonalds selected us to provide project management services for their U.S. promotions, which most
people now recognize as The Happy Meal. This was a starting point for the full range of promotions/marketing
analytics and project management services we currently offer; and, where more than 1.5B premiums are moved
annually by our Promotions Management team across the globe. During the 1990s, we also extended our
services into supply and demand planning, thereby positioning HGS to provide a full range of supply chain
integration and marketing and business analytics services. This team has achieved over $1B in supply chain
optimization and network savings.
In September 2012, we announced a joint venture with Alpha Waste Solutions, a waste and recycling
management company. This business is focused on providing true closed loop sustainability, recycling, and
waste solutions to regional, national, and global companies. Our focus and expertise in this area enables us to
help more businesses achieve their sustainability goals and keep ahead of growing regulatory demands for
greater environmental responsibility.
While weve evolved both in breadth of function and geographic scope, our core principle has never changed:
delivering exceptional value to a growing number of customers. Throughout our long history, this approach has
positioned us as an innovator in the packaging industry, a powerful supply chain solutions provider, and best-inclass in promotions management - all of which has earned us deep and lasting partnerships with a roster of
distinguished clients worldwide.

http://www.havigs.com/en/about-hgs/history

Our Supply Chain

SIX PRIORITY PRODUCTS FOR SUSTAINABLE
SOURCING
The Company prioritizes its sustainable sourcing work based on product impact and influence.
That is, we focus on the products that carry the greatest impacts--such as biodiversity loss or

deforestation--and where we have the most influence to create positive change. In 2010,
World Wildlife Fund helped the Company define sustainable sourcing priority areas, and we
continue to work with them to evaluate progress and opportunities for improvement. Much of
the Companys work toward a sustainable supply chain is also connected to our Planet Pillar
priorities and aspirational goals. In an effort to reduce impacts across the entire McDonalds
value chain, the Company is engaging suppliers, employees and even customers on this
shared journey.
When the Company established its Global Sustainability Framework in 2014, we set
aspirational sourcing goals for five of our six priority products beef, packaging, fish, coffee
and palm oil. Since then, we have made good progress on many fronts, while continuing to
address some challenges.
The Company is working with suppliers, industry groups and non-governmental organizations
(NGOs) to develop a common set of guiding principles and best practices for sustainable
poultry poultry being our sixth priority product. We plan to finalize these global principles in
2016.

MILESTONES IN BEEF SUSTAINABILITY

The Company helped found the Global Roundtable for Sustainable Beef (GRSB) to bring
together key players in the beef value chain around a common purpose to help ensure that all
aspects of the beef value chain are environmentally sound, socially responsible and
economically viable. In 2014, the GRSB finalized a global set of principles and criteria,
marking a major milestone in our journey to sustainable beef and meeting the Companys first
beef goal. At the first annual Global Conference on Sustainable Beef, held in 2014, more than
96% of the membership voted to approve these principles and criteria. The next step involves
pilot projects to test this new framework in the McDonalds supply chain. Since beef
production varies globally, the Company has begun with pilot work in Canada and will follow
with pilots in other McDonalds markets.
Learn More

SUSTAINABLE PACKAGING

Most of the fry boxes, sandwich clamshells, wrappers, cups and other items that help to
keep McDonalds food ready to eat are made of fiber-that is, paper or cardboard. The
Company and its suppliers have made positive gains in several areas toward our 2020
aspirational goal.

Based on fiber-based consumer facing packaging for all McDonalds restaurants globally. Packaging categories included without limitation are the following: hot cups, cold cups, carry out bags, folding cartons,

clamshells, wraps, food service bags, napkins, salad bowls, Happy Meal containers, drink carriers. Packaging metrics do not include operational supplies or pre-filled food packaging (e.g., sauce packets, salad
dressings).

Methodology for calculating metric was modified in 2012 to be in line with other fiber certification standards by requiring chain of custody documentation.

McDonalds priority is to optimize the amount of packaging we use, and to use only
sustainably sourced materials that are recyclable or compostable. In collaboration with our
suppliers, we pursue these priorities in three critical areas:

Design - Optimize weight and simplify the number of materials used in our
packaging

Sourcing - Increase use of recycled or certified raw materials

Recovery - Work to use recoverable packaging with viable end-of-life options
On April 21st, McDonalds announced a global Commitment on Deforestation across the
Companys expansive global supply chain. The Commitment builds upon McDonalds Global
Sustainability Framework and longstanding leadership in the area of sustainable sourcing. The
commitment encompasses the entire supply chain and focuses on priority products, including:
beef, fiber-based packaging, coffee, palm oil, and poultry, for which the Company will begin
developing specific time-bound sourcing targets in 2015. Learn more.
McDonald's is a participant in World Wildlife Fund's Global Forest & Trade Network - North
America (GFTN-NA) program. As a participant in the GFTN-NA, McDonald's will continue to
focus on reducing its forest footprint by making progress towards our 2020 goal to purchase
100% of fiber-based packaging from certified or recycled sources. McDonald's Global Fiber
Sourcing Policy provides more detail about how we will measure progress and continue to
drive improvements for more sustainable packaging overall.

INNOVATIONS FOR SUSTAINABLE COFFEE

McDonalds is committed to serving coffee and espresso drinks brewed from responsibly
sourced, high-quality coffee beans and invests in farmer training that supports ethical,
environmentally responsible and economically viable production in coffee-growing
communities.In 2014, we made steady progress toward our goal, led by McDonalds USA,
where the volume of certified coffee served in its 14,350 restaurants reached approximately
22%, and Brazil, where 100% of the coffee sold in McDonalds restaurants was certified by the
Rainforest Alliance. These significant steps toward meeting our 2020 goal follow leadership
demonstrated in McDonalds European1 markets, which already source 100% of their coffee
(except decaf) from farms that are Rainforest Alliance Certified, UTZ Certified or others.
1 Excludes Morocco, which McDonalds considers part of its geographic segment in Europe.

Learn More

SUPPORTING SUSTAINABLE PALM OIL

In 2014, the Company came close to achieving its goal of having 100% of palm oil used for
restaurant cooking or by McDonalds suppliers to par-fry chicken and potato products be
RSPO-certified sustainable or covered by GreenPalm Book and Claim certificates by 2015. As
of the end of 2014, approximately 97% of palm oil used for these purposes was either certified
or covered in this way.
Looking forward to 2020 and the longer-term aspirational goal we have established on this
important issue, we see an opportunity to take more of a leadership stance in 2015. Weve
heard from expert stakeholders that our palm oil goals and strategy can be made stronger. We
agree. We are committed to taking a holistic approach that will serve both the Company and
the industry as a whole.
To this end, the Company will continue encouraging McDonalds suppliers to move toward full
traceability to their plantations and mills as a way to ensure no deforestation and deep peat
development.
Learn More

FISH
We began our journey toward sustainable fish in 2001, working with Conservation
International to identify ways we could help protect long-term fish supplies and improve the
health of surrounding marine ecosystems. As a result, McDonalds sustainable fisheries
standards have guided fish purchases since 2001. Since then, McDonalds global Sustainable
Fisheries Program has grown to include purchasing standards, annual third-party
assessments of all our fish suppliers and the purchase of whitefish from sustainable fisheries.
Globally, 100% of the fisheries from which McDonalds sources whitefish are from verified
sustainable sources.

PRINCIPLES FOR SUSTAINABLE POULTRY

Because there are no broadly accepted, credible principles or standards for sustainable
chicken production, the Company is working with its suppliers, industry groups and
NGOs to develop a common set of guiding principles and best practices for sustainable
poultry. We plan to develop and test these global principles and criteria in 2016 so we
can learn from them and expand them for McDonalds poultry supply.
Initial progress toward principles and criteria is being made in Europe, where McDonalds has
been leading the way toward sustainable chicken production with the Sustainable Three Es
Project. This three-year initiative aims to improve standards in the European supply chain and
inform global principles for sustainable poultry. The project includes a 2020 commitment by
suppliers to McDonalds Europe to use only enriched housing systems, including natural
daylight and perches, and purchasing only sustainable certified soy, a major component of
poultry feed (in 2014 approximately 20% of the soy used for chicken feed was covered by
Roundtable for Responsible soy certificates).
The Company continues to support the Brazilian Soya Moratorium, which helps prevent
deforestation in the Amazon biome.

https://www.aboutmcdonalds.com/mcd/sustainability/sourcing/priorityproducts.html