Chobani revolutionized the way we think about yogurt, raising our standards from the traditional sugar-laden, watery stuff to thick, creamy, full of protein, and elevating the term “Greek” to be synonymous with high quality. It grew to $1 billion in revenues from 2005 to 2010 in an area historically dominated by two or three big companies for decades (4). Critics could describe this as a blind sprint to growth – aggressively pursuing revenue at the expense of critically looking at its supply chain and distribution, and completely overlooking the need to digitize and adapt to using data to communicate and develop an extended, fast, and agile supply chain process.
Old fashioned supply chains caused Chobani’s major headaches
Supply chain digitization needed to have been at the forefront of Chobani management’s concerns, and I argue that a lack of movement towards digitization caused many of Chobani’s problems post-2010. For software products managing each part of the supply chain to communicate would have made production much more cost efficient, and improved quality control – both critical issues that Chobani encountered (3).
- Inefficient procurement in one-off purchasing led to millions of wasted dollars and general unused capacity in an expectation of more aggressive growth than was reality (10)
- Disjointed supply chains interfered with Chobani’s ability to procure and deliver products in increasingly volatile weather conditions (5)
- This came to a head in August 2013 when customers started reporting incidences of mold in containers and resulting illnesses, leaving Chobani facing intense public backlash, and issuing a a recall in September (6)
IT/OT convergence has brought Chobani back on track
Chobani went on to reevaluate and make changes, hiring a new SVP of supply chain and operations, Andreas Sokollek who immediately expressed a commitment to modern distribution (2). Sokollek’s team went on to save $10 million from negotiating better prices for raw materials and reducing waste (10). Critically, he recognized the need to evolve to a connected digital supply chain.
While the old systems were a hybrid model of digital, physical, and entirely siloed discrete pieces, the company has undergone a project for information technology / operational technology convergence (IT / OT) – that is, they have now integrated IT systems that use data-centric computing with OT systems that are used to monitor events, processes, and make adjustments in operations (7). Historically, OT has not been networked technology, and many devices for monitoring have been closed individual systems. To avoid the inefficiencies and quality problems that had stunted its previous hockey stick growth, Chobani focused on:
- Key areas of infrastructure like process automation hardware and programing are now integrated
- Constant online communications to be paramount in daily functionality of the plant, expanding into startup, testing, expansion into new locations, and general support up and down the supply chain
The goals of the IT/OT convergence project were to “increase productivity, reduce downtime, execute faster changeovers, meet and exceed regulatory demands, be dynamic and flexible for growth, maintain product diversity, and support business demands” (7). As a result of this project, Chobani can realize 99% uptime on communications and controls, such that everyone on the line can be aware of the needs of the entire chain.
Innovating and modernizing further is the key to Chobani’s continued relevance and success
Chobani should further address this trend towards digitization by directly responding to the pressure that companies face to bring products to market faster while maintaining quality control. Consumers increasingly want to know where their food ingredients come from, especially with the rise of allergies and demand for organic food (8), and to keep up with the trends that allowed Chobani to rocket to success, it must adapt to future trends, and adapt its manufacturing along with it (9).
- Chobani’s infrastructure must be overhauled to be capable of sharing data in order to be fully transparent and flexible.
- There must be more visibility up and down the supply chain to optimize flexibility and quality control – Chobani needs to understand the timing and quality of raw materials coming in to create the conditions within the factory to minimize waste and avoid contamination. Enterprise resource planning (ERP) can help optimize scheduling on top of existing software, while integration models have the capability to leverage existing software to automate data and tie information together.
- Advanced analytics systems must be implemented in order to fully understand all plant data available, but also externally to understand feedback coming directly from the consumer
- The extreme end of this flexibility is to be able to respond to consumer feedback in real time. The goal of a completely digitized and integrated supply chain is ambitious, to build a chain both resilient and responsive.
Remaining questions about the future of digitization and Chobani:
- How will security in a completely connected plant be affected in the age of hackers and electronic terrorism?
- How large are the downsides to being predictive? Do controls need to be put in place to avoid overindexing on flexibility?
(1) Berttram, Philipp, and Stefan Schrauf. 2017. “Industry 4.0: How Digitization Makes The Supply Chain More Efficient, Agile, And Customer-Focused”. Strategyand.Pwc.Com. https://www.strategyand.pwc.com/reports/industry4.0.
(2) “Chobani Builds On Strong Commitment To Quality And Distribution, Names New SVP Of Supply Chain And Operations”. 2013. Prnewswire.Com. https://www.prnewswire.com/news-releases/chobani-builds-on-strong-commitment-to-quality-and-distribution-names-new-svp-of-supply-chain-and-operations-230980011.html.
(3) “Digitizing The Value Chain”. 2017. Mckinsey & Company. https://www.mckinsey.com/business-functions/operations/our-insights/digitizing-the-value-chain.
(4) Durisin, Megan. 2017. “Chobani CEO: Our Success Has Nothing To Do With Yogurt”. Business Insider. http://www.businessinsider.com/the-success-story-of-chobani-yogurt-2013-5.
(5) Gasparro, Annie. 2015. “At Chobani, Rocky Road From Startup Status”. WSJ. https://www.wsj.com/articles/at-chobani-rocky-road-from-startup-status-1431909152.
(6) Jaslow, Ryan. 2013. “Chobani Recalls Some Yogurt Lots For Mold, Illness Reports”. Cbsnews.Com. https://www.cbsnews.com/news/chobani-recalls-some-yogurt-lots-for-mold-illness-reports/.
(7) “Integrating Process & Business Systems For Manufacturing Chobani Yogurt | ARC Advisory Group”. 2017. Arcweb.Com. https://www.arcweb.com/blog/integrating-process-business-systems-manufacturing-chobani-yogurt.
(8)”PMMI”. 2017. Pmmi.Org. https://www.pmmi.org/gateway?dest=/business-intelligence/webinars/2017-trends-food-processing-webinar.
(9)”Paving A Way To The Digital Plant | Profood World”. 2017. Profoodworld.Com. https://www.profoodworld.com/articles/paving-way-digital-plant.
(10) SCDigest Editorial Staff. 2015. “Greek Yogurt Pioneer Nearly Loses It All Due To Supply Chain Woes”. Scdigest.Com. http://www.scdigest.com/ontarget/15-05-26-2.php?cid=9340.