Toothpaste courtesy of robots?! Colgate-Palmolive’s digital supply chain

CPG companies strive to make supply chains more tech enabled to increase efficiency, improve profits, and better cater to the customer. Colgate-Palmolive is doing it well.

The digital supply chain – a source of competitive advantage

To keep pace with the changing demands of customers, today’s companies are under more pressure than ever to have faster and more precise supply chains.1 As a result, companies are investing resources to digitize their supply chains.

Digital supply chains use new technologies – like the Internet of Things, advanced robotics, analytics, and big data – to transform supply chains into more efficient and flexible machines. The easiest way to understand what it means to have a digital supply network is to understand the characteristics of one.

Characteristics of a Digital Supply Chain:2

  • “Always-on” agility – constantly aggregating and analyzing data sets to drive faster and more accurate decision making allowing the supply chain to react more quickly and flexibly
  • Connected community – the supply chain ecosystem – from suppliers to partners and customers – shares information in real-time allowing the supply chain to adapt to the most up to date information from across the ecosystem
  • Intelligent optimization – humans, machines, and predictive analytics work together to make optimal decisions for the supply chain
  • End-to-end transparency – operators have visibility into all elements of the supply chain and can understand the flow of materials and financial implications
  • Holistic decision making – decision making incorporates information from the entire supply chain network including: efficiency / performance data and financial data

As firms’ supply chains become more digital, companies become increasingly resilient and responsive, helping them meet customer needs more efficiently and transparently.3 Digital supply chains are emerging as a key competitive advantage.

Case study: Colgate-Palmolive embracing supply chain digitization

With $15.2B in revenue in 2016 and 45 manufacturing sites around the world,4 it’s no surprise that CPG player Colgate-Palmolive has leaned into this trend.  Specifically, Colgate-Palmolive’s focus has been on improving analytics and automation in the supply chain.

Analytics: Colgate-Palmolive utilizes SAP HANA – a database services and analytic processing solution – for deep analysis and decision making. Employees at all parts of the supply chain have access to the system and rely on it for KPI assessment and issue notification. The information helps Colgate-Palmolive employees better manage tradeoffs between cost, service, and inventory; it also allows them to focus on continuous improvement by diving into the root causes of identified issues.4

Automation:  Industrial robots are already well established in Colgate-Palmolive’s supply chain and more recently the company has progressed to collaborative robots to help production workers with material handling. It has also incorporated automated guided vehicles (AGVs) to move around the factory more independently. Director of Factory Performance and Reliability for Colgate-Palmolive, Andres Bejarano emphasized “the idea is to automate everything that can be automated in the manufacturing process and supply chain operations;” 4 accordingly, the company is also rolling out other automation tools: 4

  • Sensors to predict failures
  • Hand-held wireless devices to assist with material flow
  • RFID (radio frequency identification) tags to track pallets and inventory
  • Video feeds and cameras to enable remote operator support

Longer term we can also expect to see 3D printing and wearables like smart glasses incorporated into the supply chain for printing spare parts and supporting factory inspections, respectively. Both are currently being piloted. 4

Where will Colgate-Palmolive go from here?

Already, Colgate-Palmolive is known as a supply chain leader, ranking #9 on Gartner’s Supply Chain Top 25 for 20175 and its digitalization efforts should only perpetuate its leadership into the future.

To ensure its supply chain remains a point of competitive advantage, it’s likely Colgate-Palmolive will pay attention to the changes industry peers are making to their supply chains.

One potential area of focus for Colgate-Palmolive could be Corporate Social Responsibility, currently a relative weakness for the company. Many companies are focusing on limiting emissions and the usage of water and natural resources. Even more sophisticated CSR programs focus on preventing hazardous waste and adopting circular processes as opposed to the linear “take, produce, throw” model. 5

P&G, for instance, plans to eliminate manufacturing waste by 2020 across 100 of its global plants. Unilever has already eliminated waste to landfill and is working on sustainable sourcing and adopting a circular model. 5

Another area of potential focus for Colgate-Palmolive may be to implement technologies that connect the supply chain more directly to the end consumer. One of its peers, Nestle, has launched an app that consumers can use to look up the availability and freshness of Nestle products in any store. 6

Where Colgate-Palmolive goes from here will likely be dictated by what will best improve performance / efficiency and meet the adapting needs of the customer. Considering all the changes, it does raise the question: how is the workforce at Colgate-Palmolive evolving to keep up with the changing technology? What skills does Colgate-Palmolive look for in its new hires? A discussion for another post…

 

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K. Alicke, D. Rexhausen, and A. Seyfert, “Supply Chain 4.0 in consumer goods,” McKinsey & Company.

2  Doug Gish, Adam Mussomeli, Stephen Laaper, “The rise of the digital supply network: Industry 4.0 enables the digital transformation of supply chains,” Deloitte University Press.

3  S. Schrauf and P. Berttram, Industry 4.0: How Digitization Makes the Supply Chain More Efficient, Agile, and Customer Focused, PWC Strategy& (2016).

4  Andres Bejarano, Colgate-Palmolive Company: Driving Change through Measuring the Digital Supply Chain, interview by APQC, June 13, 2017. https://thecge.net/case-study-colgate-palmolive-transforms-supply-chain-with-smart-manufacturing/.

5  Stan Aronow, Kimberly Ennis, Jim Romano, “The Gartner Supply Chain Top 25 for 2017,” Gartner, Inc., accessed November 15, 2017.

6   Dave Blanchard, “Top 25 Supply Chains of 2017,” Industry Week. June 19, 2017, http://www.industryweek.com/supply-chain/top-25-supply-chains-2017, accessed November, 15, 2017.

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3 thoughts on “Toothpaste courtesy of robots?! Colgate-Palmolive’s digital supply chain

  1. Colgate-Palmolive seems like an ideal candidate for a modern and efficient supply chain. They sell low-price, high-volume goods in a number of different countries and can benefit tremendously from small improvements in efficiency across the supply chain.

    One of the last questions raised about future hires is an interesting point. It seems that nearly every company is refashioning itself as a tech company these days, and not unjustly so. Will Colgate-Palmolive be able to convince highly-skilled technologists to work on their supply chain? The shift towards being more of a tech company requires a simultaneous shift towards being a company with a greater focus on human resources and talent development. It will be interesting to see how CPG companies handle the transition.

  2. You talk a lot about the general trends in the digitalization of supply chain, and various automation tools that Colgate-Palmolive implements, and you mention that Colgate-Palmolive was recently ranked #9 on Gartner’s Supply Chain Top 25 for 2017; however, what are the drivers (aside from access to capital) underlying why Colgate-Palmolive has been able to get ahead of competitors? What are best practices that other companies can take away from Colgate-Palmolive and try to implement in their own companies?

  3. I’m a fan of your post, CPG Manufacturing Fan. Really great analysis. I especially appreciate the characterization of what a digital supply chain means at the beginning of your post.

    A few questions. To the point you raised of CSR, what sort of a social responsibility does a company like Colgate Palmolive have to its employees, who may lose their jobs due to automation? What role do you think such considerations should play in a company’s decision to automate work that formerly provided meaningful employment?

    I also wonder how innovative Colgate truly is when it comes to supply chain digitization. For instance, the Gartner report [1] which rated Colgate #9 considered the following factors in its ratings: (Peer Opinion*25%) + (Gartner Research Opinion*25%) + (ROA*20%) + (Inventory Turns*10%) + (Revenue Growth*10%) + (CSR Component Score*10%)

    The variables are defined as:
    1. Gartner Opinion and Peer Opinion: Based on each panel’s forced-rank ordering against the definition of “DDVN orchestrator.” Demand-driven value network (DDVN) is a business environment holistically designed to maximize value of and optimize risk across the set of extended supply chain processes and technologies that senses and orchestrates demand based on a near-zero-latency demand signal across multiple networks of corporate stakeholders and trading partners. [2]
    2. ROA: (2016 net income/2016 total assets)*50% + (2015 net income/2015 total assets)*30% + (2014 net income/2014 total assets)*20%.
    3. Inventory Turns: 2016 cost of goods sold/2016 quarterly average inventory.
    4. Revenue Growth: (Change in revenue 2016-2015)*50% + (change in revenue 2015-2014)*30% + (change in revenue 2014-2013)*20%.
    5. CSR Component Score: Index of third-party corporate social responsibility measures of commitment, transparency and performance.

    My question for you – do you think that this is a fair rating system? My sense is that it may not be. E.g. strong ROA and inventory turns could certainly be a result of effective digitization of the supply chain, but I can think of a number of other factors as well. Revenue growth and CSR efforts seem to be very strange measures of digitization of the supply chain.

    [1] https://www.gartner.com/newsroom/id/3728919
    [2] https://www.gartner.com/it-glossary/demand-driven-value-network-ddvn

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