With 64 years of history, Sabritas is one of the most important companies in the country, which has grown based on the following precepts: to be the favorite option for snack consumers and customers; achieve challenging, sustained and profitable growth by having absolute control of the points of sale; and promote the passion to serve and the development of its people in a culture where everyone participates.
Its organizational principles: Exceed consumer expectations; achieve a perception of insurmountable value and quality in all its products; passion to serve; contribute a maximum effort to exceed the expectations of its clients; innovation (surprising the consumer by creating the best products, systems and processes that ensure their competitive advantage); Absolute domain to achieve presence at each point of sale.
For this, the reengineering of its processes has been a fundamental part, as well as the optimization of each of the activities and functions of its Supply Chain, which is why the Association for Operations Administration, APICS Chapter Mexico and the Evaluation Committee of the 2006 APICS Partner Recognition in Supply Chain Optimization, after concluding the analysis and evaluation phase of the criteria established in the call and participation bases determined that Sabritas, S. de RL de CV was the winner of the aforementioned award for being considered the most innovative company of 2006 when developing the New Distribution Model project: Hub & Spoke within which the three main objectives were to improve sales service,reduce costs in the supply chain and try a new, more efficient and faster supply model.
In this way, Sabritas, S. de RL de CV became the First Winning Company of this award, a forerunner in the Operations Management sector in Mexico and awarded by an instance of specialists with a worldwide presence. The objective of the award is to promote the implementation of innovative methods in the optimization of supply chains; identify and share best practices within the Mexican business environment; promote the values and principles of APICS Mexico.
Generals
The company currently has eight snack and one candy production plants in Mexico, as well as one in Mission, Texas. Additionally, it has strategic alliances with more than 25 Mexican manufacturers of sweets, chocolates and powdered drinks to supply the national and Central American market. All the company's plants regularly undergo audits by the American & Baking Institute (AIB), which ensure that the sanitary quality of their products is optimal.
In order to support the growth of our country and contribute to the development of the Mexican countryside and guarantee the quality of its raw materials, the company supports the development of its national suppliers and since 1991 has had the Sabritas Agricultural Development Center (CDAS) that allows producers to have high quality seeds to offer consumers products in unbeatable conditions. The result of this effort and its constant investments enable the company to generate 300,000 indirect and temporary jobs in this area today.
Interview
After being announced as the winner, APICS Chapter Mexico interviewed Ing. María Teresa Renán, Director of Sales Service of the company who was in charge of the New Distribution Model project: Hub & Spoke whose main focus was the implementation of new processes and make an improvement on something existing, which lasted from August 2005 to December 2006 and had impacts on various indicators such as increased sales, reduced exhaustions, savings in service costs, reduced days of inventories, cycle times of shorter supply and maximization of transport utilization.
María Teresa, what was the optimization of the Sabritas Supply Chain?
I think the project is really very interesting. When we conceptualized it, we didn't think it was going to have the impact it did. It was born as a transportation idea, we grew it and finally it was a very successful project that has given very good results, so we were interested in sharing it. Sabritas supply chain optimization is not the typical practice that encompasses only one function and is a small optimization. It really is a comprehensive transformation process.
Why did you start with the transport function, did they have areas of opportunity to optimize, previously detected?
As we know, the majority of Sabritas sales are made through the retail channel. The delivery vans arrive at places that we call branches (or agencies call them in other companies), from there they take the product and they are going to deliver it to all customers (branches). These branches must be supplied with finished products.
We had a significant concentration of branches in the Bajío region and we had trucks that normally waited a couple of hours at them and were being wasted. So, it was born as a transportation project, seeking to optimize flows and routes. We wanted to have a kind of hub, however, building on that idea what we discovered was that we could not only make a transportation hub, but also a product hub.
What was the New Distribution Model: Hub & Spoke?
This project creates a Sales Branch Supply Model, which integrates them into the supply chain, and which is faster and at a lower cost.
The Model is based on four key elements:
- A Mixing Center strategically located to concentrate the inventory of nearby branches (2 hours away), which in this case we opened in Querétaro. The development of a new process completely redesigned from the exit of the product from the plants to the administration of the inventory in the Sales Distribution Centers that allow the required supply speed. In this case, the product comes from three plants: Veracruz, Mexico, DF and Guadalajara. A new information platform (MCR) that allows to execute the supply in a faster and more reliable way and the centralized administration of the demand. The impeccable execution of all the activities included in the operational and planning processes.
What have been the achievements with the implementation of the new Model?
We have had significant savings in terms of freight because we optimized transport, streamlining loading, unloading and restructuring circuits. As an example, from the Querétaro Distribution Center to nearby branches, they make between two and three trips per day per transport unit, with fixed arrival appointments for each one.
In addition to the productivity expected by the improvement in the optimization of the transport fleet, the service improved dramatically. We managed to significantly improve the fill rate at branches (since we are arriving with a better product mix and a greater opportunity) and reduce exhaustion.
We measure the service in the branches as exhaustion. When the seller arrives and does not find the product he needs, we register a shortage. We reduce stockouts by 75% with one day of inventory.
Traditionally, you have inventory in order to have a good level of service. In this case we are guaranteeing the level of service through speed. Increasing the speed of the chain is how we are managing to provide the service and not necessarily through high inventories.
This has allowed us to improve the freshness of our product and reduce the spaces that the sales branches had. Now instead of buildings of two thousand meters, we have small facilities where we practically make way as a platform crossing, where the merchandise arrives and is loaded onto the trucks. We also had a lot of people who did non-value-added activities, they were always receiving product, arranging it, rotating it, raising and lowering it. We eliminate this unnecessary handling, as an example, by reducing inventories we now do physical inventories in the branches in 20 minutes when previously it took us four hours.
We also shorten cycle time, synchronizing and speeding up the chain. The planning cycle time was reduced from 15 to 2 days and the response to branches from 48 to 4 hours.
As a consequence of these results, our sales have also grown.
What was the most critical area to align to have the entire supply chain process well optimized?
I think the most critical thing has been the timing of all areas. The success of this project was that we looked at the entire supply chain. Traditionally the Branches are on the Sales side and traditionally the Supply Chain ended in the truck that delivered product to the branches. Each one was constantly looking for optimizations that were not being entirely effective.
At the moment that we understood the complete process and considered the entire chain, integrating the branches, at that moment we understood that the benefit lies in the end-to-end integration of the Supply Chain to the seller's truck.
In which aspects of the operation has greater emphasis been placed to guarantee the level of service?
The Model has forced us to execute each activity of the process flawlessly. We have to be exact in the number of assorted boxes, we cannot make a mistake because a missing box is the one that the seller does not take to the customer. Nor can we make mistakes in the schedules, so we have to make appointments throughout the process: forward with the Branches and backward appointments with the Plants.
What type of technology and / or systems are they using in their distribution centers to guarantee the availability of information and maintain the synchrony of their chain?
For the handling of the orders we have an OMS that is an inhouse development; for inventory management we have the RedPraire WMS; and in the planning and programming platform we have several I2 modules.
What departments of the company participated in the development of the Model and the approximate number of people that made up the team?
Different people and areas have participated at different times, but we mainly work on the project in the following areas:
- Logistics: Supply Chain Planning (4 participants); Traffic (6); Distribution (12); Logistics Staff (5). Sales: Sales Planning (4); Sales Field (5). Finance (3). Human Resources (3). And other areas such as Purchasing, Engineering, Systems, etc.
What were the areas of knowledge used for the development of this project?
It is a combination of several areas. It mainly has to do with demand management, master production planning, detailed planning, inventory management, warehouse management, theory of constraints, inbound logistics, outbound logistics, as well as redesign of policies and processes.
At the time of implementation, what are the most important obstacles or critical areas that the management team encounters: processes that are not clearly defined, system failures, errors in the resizing of logistics facilities, equipment selection or reluctance To the change?
I think in our case there were three critical areas. First, the processes were not integrated. To achieve effective optimization, the entire process must be reviewed, involving and convincing all the functional areas that execute them and that are only responsible to the organization of their own function. Managing to convince everyone that the final benefit is for the company, no matter in which link of the chain the profit is, was not an easy task. I think that in this aspect, for us, the key element was the early involvement of all the areas that participated.
The second critical issue in my opinion is resistance to change. We have a hard time changing the way we do things, especially when this way has led us to be successful in the past. In our case, the fact of having opened a new operation helped. We design new processes completely without previous paradigms. We even design a new organization: new positions, people have a different profile and we have a different compensation system that rewards the achievement of results and teamwork.
And finally, it is key to have a robust information system as the basis for the new processes. In our case, we already had a couple of years developing the new mathematical model developed in the I2 tools, which we call MRC (Continuous Replenishment Model).
What is the future of this initiative?
The objective is to extend it to the entire country to cover as many Branches as possible and add other functions that allow us to better serve our clients.
What contribution does Sabritas make to the Mexican logistics and operational sector?
We broke several paradigms: flexibility, speed, lean supply models, supply chain integration and new organizational models, among others.
We are proving that these issues are critical today, even in a company as successful and the size of Sabritas.
Why do you think your (Model) expertise is worthy of an Award in the Supply Chain Management area?
Through an initiative we reinvented our Supply Chain and broke an important paradigm by improving service level while reducing inventory levels to a minimum. Additionally, we achieved very important savings and other non-quantifiable benefits such as improved organizational climate and real teamwork between the Sales and Operations areas.
Box 1. Currently Sabritas, one of the most important subsidiaries of Grupo PepsiCo, has in Mexico 10 production plants and 6 Mega Distribution Centers and almost 200 Branches. It is the largest consumer of the potato produced in Mexico.
