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Report February 2019
The Top 6 Supply Chain Breakthroughs, 2019
This document is the result of primary research performed by SCM World. SCM World’s methodologies provide for objective, fact-based research and represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by SCM World and may not be reproduced, distributed, archived or transmitted in any form or by any means without prior written consent by SCM World. © 2019 SCM World, A Gartner Community. All rights reserved.
Geraint John leads the sourcing, supplier management, supply chain risk management and globalization
research and content streams for SCM World, a Gartner community. He provides insights, learning,
development and advisory support to leading global companies through practitioner-led webinars, reports,
interactive workshops and live events.
Prior to joining SCM World in 2012, Geraint was an executive consultant at State of Flux, a procurement
and supply chain consultancy. At State of Flux, Geraint specialized in supplier relationship management
research, training and process design projects for clients in sectors such as mobile telecom, consumer
goods and financial services. Geraint also led the firm’s annual global supplier relationship management
(SRM) benchmarking study.
Previously, Geraint worked as a journalist and editor, spending more than a decade covering the global
procurement community. He was the founding editor of “CPO Agenda,” an international business review for
procurement, launched in the spring of 2005. Before that, he spent five years as editor-in-chief of “Supply
Management,” the U.K.’s biggest circulation procurement magazine.
Geraint holds a degree in economics and politics from the University of Warwick. He is based in London.
Geraint JohnVice President, Analyst Gartner
Authors
Casey Logan supports an expanding portfolio of in-depth research reports, summary reports, blogs and
other projects for Gartner. Prior to joining Gartner, Casey was a business reporter and longtime editor. He
holds a degree in English from Florida Gulf Coast University in Fort Myers, where he is based.
Casey LoganWriter Gartner
Contents
Driving Continuous Improvement for Greater Customer Experience
17Dell Builds a Legacy of Good
1411Empowering Small Businesses With Amazon Delivery Service Partner Program
Executive Summary
4Pushing the Boundaries of Progress
5 8How Artificial Intelligence Made Beer Clearer and Tastier
References
25Conclusions & Recommendations
24Using Future-Led Execution to Redefine How Jeans Are Designed, Made and Sold
20
About SCM World, A Gartner Community
26
4 The Top 6 Supply Chain Breakthroughs, 2019
February 2019
Awarded in February 2019, the fifth annual SCM World Power of the Profession Awards recognized
breakthrough successes in the supply chain community.
This year’s Supply Chain Breakthroughs of the Year award category includes another set of outstanding
submissions that continue to demonstrate the momentum established in previous years. These initiatives
benefit the wider social community and the environment while also delivering exceptional results that benefit
businesses, immediate stakeholders and customers.
The overall Supply Chain Breakthrough of the Year award is presented to the program that most
impressively demonstrates success across all three subcategories. The finalists for this prestigious award
are featured within this report. The finalists for the Supply Chain Talent Breakthroughs, 2019 category are a
representation of the breadth of success submitted in 2018.1
The six influential initiatives recognized for reaching the final round in the 2019 program are summarized below:
• AB InBev used an artificial intelligence (AI) innovation to greatly improve its filtration processes,
enabling operational efficiency. This allowed the company to make its beer more consistently tasty, at a
reduced cost and in less time.
• Amazon created a plan to address its growing challenge with shipping capacity. Its Amazon Delivery
Service Partner program, a fresh concept with a relatively low entry cost, allows entrepreneurs to
deliver packages for the company.
• Dell, through its 2020 Legacy of Good initiative, takes a leadership role in addressing global
environmental sustainability challenges. It take a circular approach, reducing greenhouse gas
emissions, using recyclable or compostable packaging and recovering used electronics.
• Lenovo designed a customer-centric approach to take actions more quickly, ultimately designing a
better smartphone with more customer interaction. This results in fewer repairs and customers keeping
their phones longer.
• Levi Strauss developed a new operating model to address long lead times, missed sales and
unproductive inventory. By using laser technology and rearranging design and production, it finishes
jeans later in the process, reducing time to market and decreasing the environmental impact.
• Merck (MSD), seeking to improve access to its critical vaccines worldwide, established a global
organization dedicated to Supplier Development and Performance Management. This led to significant
performance improvements in supplier shipments and disruptions.2
The multitier judging process evaluated yet another record number of nominations. A panel of esteemed
supply chain executives and academics awarded the Customer Innovation of the Year to MSD, the Business
Win of the Year to Levi Strauss and Dell’s initiative was recognized as the Social Impact of the Year.
For demonstrating excellence across customer innovation, business win and social impact, the honor of the
2019 Supply Chain Breakthrough of the Year went to Levi Strauss.
Congratulations to all for their successful and inspiring initiatives!
Executive Summary
5
Pushing the Boundaries of
ProgressIn a volatile, uncertain and fast-changing business
world, achieving breakthrough results in supply
chain is arguably getting tougher. Most of the easier
pickings, from a performance improvement and
supply chain optimization perspective, have long
since been harvested. And while the digital revolution
brings exciting new technologies and possibilities
into play, supply chain leaders also face familiar,
longstanding and complex barriers to progress.
True breakthroughs, as opposed to just
incremental moves in the right direction, require
not only innovation and fresh thinking, but also
plenty of dogged hard work to convince people
to let go of established practices and embrace
new opportunities.
The six winning case studies embody these
characteristics across a wide range of initiatives,
from step-change improvements to the
manufacturing process (in the case of AB InBev), to
enterprisewide supplier performance management
and development (in the case of MSD). Despite
their differences in sector and scope, these
examples exhibit four common traits that, when
taken together, help to define best-in-class,
breakthrough value in supply chain management
today. They are as follows:
Focus on the customer experience. Leading
supply chain organizations put the customer at
the heart of their vision and mission. They see
their purview extending beyond on-time delivery
to include the customer’s experience of using their
products and services. For Lenovo, this meant a
much deeper understanding of how customers
use its smartphones on a daily basis, in order to
5
6 The Top 6 Supply Chain Breakthroughs, 2019
February 2019
improve their performance and reduce the number of returns and repairs. The company also
introduced new consumer-centric metrics to track its progress and align employee compensation
with customer satisfaction more directly.
For jeans maker Levi Strauss, a late-stage postponement strategy enabled it to reduce lead times
and inventory for its retail customers while enabling consumers to personalize the design and finish
off their jeans in-store. This has given the company a midterm competitive advantage in the market,
as rivals work to catch up. Our research shows that just 15% of companies have the ability to vary
products to meet customer needs in this way, although 55% are either piloting such approaches or
planning to use them in the future.3
Harness the latest technologies. Both Lenovo and Levi Strauss used digital technologies in the form
of data analytics, lasers and imaging tools to drive their respective initiatives. At brewer AB InBev, machine
learning (ML) and artificial intelligence (AI) were used to solve a longstanding production conundrum —
when to change the filters that are vital in ensuring a beer’s clarity and taste. By partnering with Google
and using a hackathon to generate ideas, the company was able to design an algorithm that reduced
filter replacement errors by 400%.
Using the insights from such analysis to optimize decision-making is seen by supply chain professionals
as the most significant way that technology will make their functions more productive over the next few
years (see Figure 1).4 Eight out of 10 supply chain professionals see big data analytics as “disruptive and
important” for their supply chain strategies, while more than six out of 10 say the same about AI. However,
effective applications of AI in a supply chain context are somewhat limited at this point, so AB InBev’s
project is a timely example of what can be achieved when human and machine capabilities are combined.
Figure 1 How Digital Makes Supply Chain More Productive
Generate market intelligence, data analytics and insights to support better decision making
Support an end-to-end supply chain by integrating trading partners
Free up time/resources to be more proactive/forward looking and less reactive/backward looking
Break organizational silos and build cross-functional/internal stakeholder relationships
Speed up project/process cycle times
Free up time/resources to focus on complex supply chain issues/projects
Free up time/resources to build and better manage external customer/supplier relationships
20 17 818 12
10 1613 15 14
22 11 1113 11
19 8 7 9 10
7 12 1012 13
5 12 11 11 10
8 109910
Free up time/resources to more deeply understand business challenges and needs
5 9 9108
Free up time/resources to develop strategy 5 6 757
% of respondents | n = 1,506
1st priority 3rd priority 2nd priority
4th priority 5th priority
SCM World’s Future of Supply Chain Survey, 2018
Source: SCM World, A Gartner Community (February 2019)
What are the most significant ways that you expect technology and automation will make supply chain organizations more productive by 2025?
7
Develop the external ecosystem. E-commerce pioneer Amazon is at the leading edge of using AI and
automation to optimize the way its supply chain fulfills customer demand. However, while technologies such
as drones and autonomous vehicles are being tested as new ways to get products to people’s front doors, the
company relies on more traditional methods for most of its last-mile delivery requirements. To keep up with U.S.
sales growth, Amazon created a program to develop thousands of independent delivery drivers to supplement
the traditional logistics network. This has created many new owner-operated businesses, as well as jobs.
Pharmaceutical giant MSD, meanwhile, developed a global supplier management and development
program that assures the supply of its HPV vaccines to patients across the world. Working closely with its
critical material suppliers and manufacturing partners, MSD has been able to dramatically improve shipment
timeliness and quality, while significantly reducing the number of supply disruptions. This example perfectly
illustrates the importance of orchestrating an extended network of firms to meet demanding — and, in this
case, lifesaving — objectives.
Do right by the planet. As well as cultivating their supplier ecosystems, responsible companies today
also pay close attention to their impact on the natural ones. Mass production requires huge volumes of
raw materials, ingredients, water and energy to satisfy the needs of a growing population. Increasingly,
consumers expect manufacturers to do their utmost to safeguard the planet’s limited resources and
delicate environment. However, our research evidence suggests that only a fifth of companies have fully
embedded sustainability into the way their supply chains operate (see Figure 2).
One company that is embracing sustainability is PC maker Dell. Its comprehensive and collaborative set of
initiatives, ranging from cutting greenhouse gas emissions by half to preventing 160,000 pounds of plastic
from entering the world’s oceans, is a model for others to emulate. The firm is not only cutting waste and
increasing recycling — as other finalists like Lenovo and Levi Strauss are doing — but also recovering and
reusing materials such as gold, plastics and carbon fiber in new products. It’s an inspiring example of what
a big company can do when it puts circular economy principles at the heart of its business model.
Pushing the Boundaries of Progress
Figure 2 Status of Sustainability Initiatives
% of respondents | n = 178Source: SCM World, A Gartner Community (February 2019)
SCM World’s Future of Supply Chain Survey, 2018
Which best describes your organization’s approach to sustainability strategy and execution?
ISOLATED (e.g., functional, tactical/reactive, internal, driven by compliance)
24
INTEGRATED (e.g., cross-functional, executive sponsorship, coordinated centrally, process change, measurement)
4
22
NONE No formal program(s) for sustainability today
20
EMBEDDED (e.g., incorporated
into mission, focus on value rather than just
cost, metrics tie back to corporate performance)
30
EXTENDED (e.g., programs with
suppliers/customers/partners across value chain)
8 The Top 6 Supply Chain Breakthroughs, 2019
February 2019
How Artificial Intelligence Made Beer Clearer and Tastier
Innovation
AB InBev partnered with Pluto7 — Google Cloud’s preferred partner for ML and AI — after it collaborated with
Google on a hackathon to find the best solutions. AB InBev and Pluto7 then evaluated six months of data at its
Newark, New Jersey, brewery, using the results with the brewmaster and brewing teams to boost performance.
Impact
The AI engine reduced errors in the filtration process by a staggering 400% over manual predictions. The
“K Filter media project” earned worldwide recognition at the Google Next conference. The ultimate impact
is better beer at a lower cost.
Challenge
AB InBev wanted to enhance its core competency: creating well-filtered beer with maximum taste and
unprecedented quality. The company determined that a key step in its brewing process was inefficient,
resulting in wasted time and money, a negative environmental impact and taste variation because humans
cannot accurately predict when to replace key filters.
9AB InBev: How Artificial Intelligence Made Beer Clearer and Tastier
The Business Challenge
As an industry leader, AB InBev attracts the best talent for its brewmasters and brewing teams, but there’s
a limit to how precise even the most adept beer makers can be when it comes to filtration. Every time
the components in the filtering process have to be replaced, the system must be stopped so the brewing
team can install the new filter media before the system is restarted. Outlet turbidity, which results in beer
cloudiness, and outlet filter pressure cause the filter to lose effectiveness.
By having to estimate when the filter media should be replaced, brewmasters often switch it out too early.
Alternatively, if the filter media is replaced too late, outlet filter pressure exceeds the acceptable threshold.
Both scenarios result in excess cost. If brewmasters could use AI to determine precisely when the filter
media should be replaced, it could help the environment by expunging less waste, improve the taste of the
beer through sharper filtration and produce more beer in less time.
Using the existing technology and insights, the Newark brewmaster could predict filter replacement with
60% accuracy. There was about one filter media change per day on each brewing line, making for nearly 350
changes on each line per year. AB InBev believed an AI solution could reduce those numbers significantly.
Customer Innovation
Using the expertise of Pluto7, AB InBev funneled data into a Google TensorFlow engine and ran it through
a Google Cloud Platform. The team studied the potential impact variables and matched them relentlessly
against the previous data, taking advantage of the engine’s speed and capability to analyze at a far
swifter and comprehensive rate. Through that process, they homed in on over 15 specific parameters that
displayed consistent predictive ability, and leveraged those to revolutionize the system.
Other companies can harvest two major benefits from following this process: First, if leaders are willing to
embrace advanced technology solutions like AI without feeling threatened or marginalized, the benefits can
be extraordinary for manufacturing productivity. Second, by hosting a hackathon to tackle a real business
problem — as AB InBev did in this case — companies can unearth the best solutions and partners and feel
comfortable trusting them to make a momentous impact.
In order to execute effectively and sustainably, AB InBev worked with Pluto7 to set up the Google
infrastructure in the pilot center and continued to cross-reference the data to ensure reality would match
the machine’s projections. This meant brewerywide buy-in and participation from the plant manager,
brewmaster and other key figures on the premises. The innovation staff’s involvement throughout the study
resulted in positive energy and cohesion from raw materials to consumer enjoyment of the beer itself.
Ultimately, the benefits of the project could only stretch beyond the pilot center if they were adaptable and
customized to other breweries. To make sure the opportunity was scalable, AB InBev put extra emphasis on
creating an algorithm that was transmutable, taking stock of various data systems throughout the globe and
establishing a more uniform foundational layer for data collection and reporting. So, in essence, the K Filter
media project produced far greater advantages for a company with a global footprint assembled from various
mergers and acquisitions. New innovation projects created a connected and optimized brewery system.
Since there is a direct correlation between the quality of the beer and the number of consumer complaints,
AB InBev focused energies on improving the variables that inherently improve customer satisfaction. It was
able to produce more beer, which allowed it to provide customers with more inventory faster, particularly in
the summer months when beer consumption increases.
10 The Top 6 Supply Chain Breakthroughs, 2019
February 2019
Business Win
Standard practice would have been to study the beer filtration process according to traditional metrics,
analyzing when and where filter media changes could be better. Those methods could have triggered
minimal improvements over time, but they never could have matched the level of performance increase the
AI engines instituted.
Companies should learn from this case study to think more holistically and be willing to embrace a
behavioral and structural change from the way “things have always been done.” That new approach
may seem confusing and counterproductive at first, but when computers are harnessed correctly,
groundbreaking enhancements like this are possible.
Inspiring organizational buy-in on innovation projects is important, particularly when creating an execution
model for sustained success. It was not enough to just get the on-site staff to see the benefits of AI in the
filtration process. To maintain momentum, it needed to distill this in a way that would be understandable
and exciting for key stakeholders. Working in tandem with Pluto7, the team went to great lengths to
educate doubters and outsiders of the efficacy of the project, and won their support to keep moving
forward and scale up.
With the 400% reduction in filter media changes on record, it quantified the immediate financial benefits,
quality improvements and efficiency savings, and proved the value of AI projects. Within the business, that
means it now has the support and license to pursue new ML and AI pilots, with the expectation of more K
filter replacement-like breakthroughs to galvanize the company.
This was the first successful AI project at AB InBev, which makes it a trailblazing experiment and the golden
child for future innovation with computing technologies.
Social Impact
There were several social benefits from this project’s innovative nature, stemming from the hackathon at
the start. By connecting and exploring in Newark, AB InBev provided an educational opportunity for the
community. From an environmental standpoint, AB InBev is now able to produce beer at a far more efficient
rate, and is doing so while reducing wastage of the filter media material. This also means less power
use, fewer energy variations from less stops and starts and a higher percentage of beer output. Other
companies can derive these same social and energy-saving benefits by emphasizing solutions that not only
help the bottom line but also create benefits for the planet.
AI and ML provide so much potential to keep saving resources and engaging the community. To keep this
optimization, the company has commissioned a suite of new AI projects it intends to share with the public.
It will host more social events that inform and catalyze activity around these new technological possibilities.
Google made this case study a focal point of its Google Next conference. Showcased in three separate
events, the main edition reached full capacity and was selected for a special press conference to highlight
the high interest and impact. Since the event, AB InBev has shared the story with countless other
companies and business owners.
11Amazon: Empowering Small Businesses With Amazon Delivery Service Partner Program
Empowering Small Businesses With Amazon Delivery Service Partner Program
Innovation
In addition to continue working with its carrier partners, including hundreds of existing small-size and midsize
businesses, Amazon knew it had to innovate a solution to build more capacity to serve customers. So it sought
people with a bias for action, ownership and deep customer obsession who wanted to grow with the rising tide
of e-commerce while helping Amazon supplement delivery capacity.
Impact
Tens of thousands of applications from a hugely diverse talent pool poured in from across the U.S.
Candidates included military veterans, serial entrepreneurs, husband-and-wife partnerships, father-and-
sons, and siblings, each interested in teaming up to make deliveries on Amazon’s behalf. The company
had selected about 100 operating partners by the end of 2018 and plans to hire more.
Challenge
Amazon has built out its own transportation network to help increase shipping capacity. Several years ago,
Amazon looked at its growth rates and saw that it was outpacing the capacity of its carrier partners, so it
needed to find a solution.
12 The Top 6 Supply Chain Breakthroughs, 2019
February 2019
The Business Challenge
Over 20 years ago, Amazon began building what has become a worldwide network of more than 125
fulfillment centers, over 70 sortation centers and more than 75 delivery stations in the U.S.
Amazon’s sales have grown dramatically over the past few years. For example, Amazon sales numbers
grew by $15 billion year over year when comparing second-quarter 2018 to second-quarter 2017. It
reported sales of $52.9 billion for the second quarter of 2018, up 39% from the prior-year quarter when it
registered $38 billion in sales. The bulk of that growth comes from North American sales.
All of that growth necessitates the need for additional shipping capacity. Amazon’s transportation network
includes Amazon Flex. This program allows people to be their own boss and set their own schedule while
delivering for Amazon and a dedicated network of over 7,000 trailers and 40 airplanes to increase trucking
and air cargo capacity.
Amazon continues to look for new ways to keep up with the volume and shipping requirements of its
business. It also likes the idea of empowering people to be their own boss and follow their dreams of
business ownership at a relatively low cost. In June 2018, Amazon unveiled the Delivery Service Partner
program, which allows entrepreneurs to deliver packages for the company.
Customer Innovation
Amazon has created an accessible opportunity for hundreds of entrepreneurs with little to no logistics
background. This provides the chance to enter one of the fastest-growing industries in the world and hire
tens of thousands of delivery drivers to grow their business. The offering is reinventing the standard profile
of operators in supply chain logistics and removing barriers for budding entrepreneurs that may have
never considered a career in logistics. Aspiring entrepreneurs are provided step-by-step support to set up,
start and manage their business. Owners also gain access to a variety of exclusively negotiated discounts
on important assets and services to keep startup costs as low as $10,000, including branded vehicles,
uniforms and comprehensive insurance coverage.
To launch this program, Amazon needed to ensure that its operation supported new entrepreneurs
from end to end. That included developing an extensive program to teach new owners about Amazon’s
customer-obsessed culture and acquaint them with existing owners and drivers. It also included building a
set of business coaches whose key focus is providing the support a new owner needs to get their business
started. Amazon also leveraged the decades of logistics experience at the company to develop a suite of
tools that owners and their drivers can use to make the delivery process seamless and standardized.
Amazon also customizes the delivery van to be more accessible. The vehicles have custom shelving built to
the company’s unique containerization operations, making the transition of packages from the warehouse
to a delivery vehicle easier and more efficient. It also installed telematics that increased the safety
technology within the vehicle and gave owners end-to-end visibility of their vans while on the road, enabling
accurate and efficient support for their drivers. Amazon provides package volume, which means these small
businesses won’t have to focus on sales.
13
Business Win
When looking at introducing the Amazon Delivery Service Partner program to its network, Amazon realized
it needed a couple of distinct components of the program baked into the design such as:
1. That it attracted entrepreneurs who would be a good fit for the opportunity.
2. That it leveraged the economies of scale to negotiate an exclusive suite of deals to cover all of the
services an owner would need to run their business on an ongoing basis — at competitive industry rates.
For No. 1, it focused on designing a program to provide the support and tools an owner would need to
be set up for success as a delivery service partner, so owners could focus on building and coaching great
teams of drivers. Amazon knew that military veterans would be stellar candidates based on their experience
with resilience, grit and motivating groups toward a common goal, and therefore, ensured it had an
incentive to help them get started with their small business.
For No. 2, it developed partnerships with trusted service providers, customizing the services to ensure they met
the specific needs that delivery service partners would have on an ongoing basis, including customized vehicles
for delivery, discounted fuel programs and professional uniforms. These components together enabled Amazon
to design a program that requires as little as $10,000 in startup costs — making it a competitive offering.
While still in the early days of the program, the public response to its unveiling has been humbling. Tens of
thousands of applicants from across the U.S. expressed interest in starting their own package delivery business.
Amazon has been impressed by the passion and diversity of candidates. As the extent of the public’s interest
became clear, Amazon quickly rolled out the program in hundreds of additional cities across the country.
Social Impact
The program’s phase one participants, who have been operating their own delivery business for six to 12
months, have already seen tremendous growth. For example, one delivery service partner in Colorado
started with zero employees in February, and by June, employed over 40 full-time and part-time delivery
drivers. Not only have small-business operators ramped up their operations at a remarkably fast pace, but
their quality of service continues to shine. It is clear from the response to the program that there is a strong
passion and ownership from individuals to start their own businesses.
Amazon constantly looks for leaders who think big and deliver results for customers. These principles
are familiar to those who have served in the armed forces. So the company committed $1 million toward
funding startup costs for military veterans, offering $10,000 reimbursements for qualified candidates to build
their own businesses. This generated interest from thousands of veterans from across the country, and
dozens of veterans have already joined the Amazon Delivery Service Partner community. The new offering
will enable hundreds of aspiring entrepreneurs to start their own package delivery business, and empower
them to hire tens of thousands of delivery drivers across the U.S.
Amazon also announced an increase of its original order of branded vans from 4,500 to 20,000 Sprinter
vehicles from Mercedes-Benz Vans so new small businesses will have access to customized vehicles to
power deliveries of Amazon packages. The increased order of Sprinter vans will be produced at the new
Mercedes-Benz plant in North Charleston, South Carolina, sparking over 900 jobs. According to Mercedes-
Benz, suppliers working with Mercedes-Benz will also create an additional 6,000 jobs in the North
Charleston area. Over 100 new delivery service partners were operational by the end of 2018, creating
hundreds of full-time jobs with competitive pay and benefits.
Amazon: Empowering Small Businesses With Amazon Delivery Service Partner Program
14 The Top 6 Supply Chain Breakthroughs, 2019
February 2019
Dell Builds a Legacy of Good
Innovation
Customers (and employees) are looking to align with companies that reflect their own values. A rising number of
requests for proposals are demanding that their partners have explicit sustainability targets. However, Dell’s work
extends beyond the customers’ demands. The company is creatively embracing sustainability, using a circular
approach to design while helping educate, engage and inspire customers and stakeholders to participate.
Impact
Dell’s Legacy of Good contributes to a comprehensive picture of responsible corporate citizenship. It
includes 50% reduction of greenhouse gas emissions from operations, 100% recyclable or compostable
packaging made from completely sustainable materials and 2 billion pounds of recovered used electronics.
Challenge
Too much postconsumer plastics, closed-loop plastics, recycled carbon fiber, ocean-bound plastics and
closed-loop gold ends up in landfills and oceans. For example, over 8 million tons of plastic enter the ocean
every year, a number that will likely double by 2025. If things don’t change, there is expected to be more
plastic in the ocean than fish by 2050. As a top technology company, Dell is in position to be a leader in
addressing global environmental sustainability problems.
15
The Business Challenge
Dell strives to keep waste out of landfills by reusing materials in its products. The company’s Legacy of
Good initiative starts from the top in the leadership with CEO and founder Michael Dell. Among many
things, this initiative drives sustainability, targeting the following five areas in particular:
• Postconsumer plastics (41 million pounds used in Dell products to date)
• Closed-loop plastics (21.5 million pounds used in Dell products to date)
• Recycled carbon fiber (2 million pounds used in Dell products to date)
• Ocean-bound plastics (16,000 pounds used in Dell packaging to date)
• Closed-loop gold (piloting in Dell motherboards)
Dell collects these materials for use in its products, contributing to a circular economy and serving
as a stellar example of a sustainable business model. However, Dell isn’t content working alone — it
is partnering with other businesses in a collaborative way, using an open-source approach to ensure
companies around the world can build on their shared lessons as they progress.
Customers and the public demand that the private and public sector step up to tackle and place greater
value on environmental sustainability than ever before. This is not a Dell problem at its core, but a global
issue in which the company viewed itself as having an expertise that can be part of the solution. Ocean
plastics, for example, are a looming environmental and human crisis. In response, Dell decided to
repurpose its products, packaging and process in order to make the most difference.
Customer Innovation
To collaborate with industry partners on ocean-bound plastics, Dell worked with Lonely Whale to invite
companies to commit to an open-source commercial supply chain for ocean plastics, allowing others to
share in the effort and learn from each other. Dell serves as a founding company for NextWave, a cross-
industry consortium to create the world’s first commercial-scale, ocean-bound plastics supply chain.
Collaborating with Bureo, General Motors, Herman Miller, Humanscale, Interface, Trek and Van de Sant,
this consortium is dedicated to intercepting ocean-bound plastics from waterways in priority areas to create
environmental and social benefits.
Ocean-bound materials are the perfect example of how a resource can go from linear to circular. Dell is
creating the first cross-industry, commercial-scale, global, ocean-bound plastics supply chain, processing
materials collected from rivers and coastal areas for use in products and packaging.
Dell has prevented 16,000 pounds of plastic from entering the ocean, and that’s just a start. The company
has committed to prevent 10 times that amount (160,000 pounds of plastic) from entering the ocean by 2025.
By raising awareness in this fashion, Dell can cement itself as an industry leader in these environmental
efforts. Dell has received several awards, including repeated recognition as one of the world’s most ethical
companies. These accolades provide credibility to the efforts, having a positive impact in communities and
impacting livelihoods. As a result, a few dozen companies have reached out to Dell about the initiative and
others have joined the effort as founding members.
Dell’s Legacy of Good is an integrated approach to environmental sustainability. It impacts customers,
employees, communities and the environment. Through its progressive agenda, Dell is invested in
continuing to move the needle to make real change. Dell is doing more good, not just “less bad,” which
customers reward.
Dell Builds a Legacy of Good
16 The Top 6 Supply Chain Breakthroughs, 2019
February 2019
Business Win
Dell realized early on that a Legacy of Good and progress in circular economy initiatives were powerful
levers to drive significant savings. Beyond responding to demand from customers, certain circular initiatives
have proven to be inventive approaches for reducing costs. One approach in particular — closed-loop gold
— looks to recycled and discarded electronics to gather gold. In fact, one ton of discarded motherboards
contains a staggering 800 times more gold than a ton of gold ore.
Dell has committed itself as the world’s largest technology recycler, with services in 75 countries and
territories. From this, it has become the first mainstream business to use closed-loop gold and closed-loop
plastics together in its products. This helps Dell wean itself off of traditional gold mining, which helps it
avoid some of the social and environmental challenges associated with mining, such as navigating conflict
zones or forced labor. The program is now focused on motherboards for usage in the Latitude 5285 2-in-1
convertible laptop, with plans to expand further.
Americans throw away 9.4 million tons of electronics every year; $60 million worth of gold and silver is
discarded in mobile phones alone. By moving to recycled e-gold, Dell is able to achieve a 99% reduction
in environmental damage versus traditional mining methods. These savings, combined with $1.8 million in
cost savings from Dell’s work with closed-loop plastics, drive the business case.
Social Impact
Dell saw the importance of taking a multimodal approach to circularity. By approaching this problem at
multiple stages, Dell drives circularity with its own waste streams and with the waste streams of other
companies. For example, Dell partners with the aerospace industry to recycle carbon fiber, which would
otherwise be industrial scrap. Rather than go to the landfill, the carbon fiber is used in Dell laptops.
From a closed-loop plastics perspective, Dell has long maintained the largest technology recycling program
in the world. However, whereas before it used to sell discarded plastics to others, Dell realized the potential
for savings and carbon footprint reduction from reusing its own plastic waste. Additionally, with its growing
closed-loop gold practice, more of this waste can be refactored.
There’s also the purchase of readily available postconsumer waste ranging from water bottles to CD
cases, which are then factored back into the production process for client PCs, displays and servers. For
nonconsumer waste, such as carbon fiber, individual partnerships help to divert waste streams directly to Dell.
The hardest problem — recapturing ocean plastics — has the least existing infrastructure. So Dell took the
initiative and set out to build an open-source commercial supply chain with industry partners to scale from
the 16,000 pounds of waste diverted today to 160,000 pounds by 2025.
To raise awareness for consumers on the importance of recycling technology, Dell and actress,
entrepreneur and activist Nikki Reed announced a jewelry collaboration in support of the sustainable design
movement. The Circular Collection by Bayou with Love and Dell is a new limited edition jewelry collection
made in the U.S. and sourced from gold recovered from Dell’s recycling programs. The collection, which
includes 14- and 18-carat gold rings, earrings and cufflinks, won the People’s Choice Award at the 2018
Consumer Electronics Show.
The initiative’s impact includes over 90% of the waste generated in Dell buildings diverted from landfills,
99% of manufacturing waste diverted from landfills and over 100-million pounds of recycled-content plastic
or other sustainable materials in Dell products.
17
Driving Continuous Improvement for Greater Customer Experience
Innovation
Lenovo created in-device instrumentation for its phones to record and transmit key attributes such as time
between charging, screen on time, CPU uptime, time in various signal conditions, time between stability events,
battery usage by application and feature usage. This helped it to understand consumers’ daily use cases and
device performance. It then worked behind the scenes to extract diagnostic information.
Impact
In better understanding the end-to-end customer experience and taking necessary actions quickly, Lenovo
ultimately designs a better product. This results in fewer repairs and customers retaining their phones
longer. Greater understanding of the return drivers, corrective actions implemented on products and
lessons learned applied to the next generation of products led to fewer phones being repaired, and fewer
phones sent for scrap and/or reclamation.
Challenge
For Lenovo, customer centricity has been a key focus the past few years under CEO Yuanqing Yang. That
focus has inspired all of Lenovo’s organizations to transform, seeking ways to understand and better fulfill
customers’ needs. In the case of smartphones, the challenge has been to gain visibility into the customer
experience, then use that information to empower action and deliver better performance.
Lenovo: Driving Continuous Improvement for Greater Customer Experience
18 The Top 6 Supply Chain Breakthroughs, 2019
February 2019
The Business Challenge
Lenovo wanted to understand customer behavior as it relates to daily phone use. Forward-looking
companies know that the consumer’s experience, positive or negative, will mirror their own success. The
traditional approach of analyzing warranty claims is too removed from the consumer experience and takes
too long. Mobile phones are complex devices and their operation is highly dependent on the infrastructure
and environment where they are used.
Consumers have high expectations that their phone will perform across all use cases. Like other original
equipment manufacturers, Lenovo needs to understand the performance of its devices versus consumer
expectations, as studies show a strong correlation between consumer satisfaction and their likelihood to
repurchase, and recommend to family and friends.
Consumer satisfaction has typically been quantified using warranty claims. Due to the complicated logistics
of the return process, it can take up to three months to obtain data and three more months of data to
detect a trend. The life cycles of some mobile phones are not much longer than six months, so this time
scale is unworkable. Lenovo needed to assess product performance quickly, drive improvement and
understand if the corrective actions were successful.
Customer Innovation
Lenovo designed the Total Consumer Return rate metric, which detects issues that users experience as
early as two months after launch. The company has given consumers the opportunity to have a voice
behind the scenes. This enables Lenovo to know exactly when the product is performing poorly and
immediately works on addressing the issue, which delivers a better product for the consumer. This helps
Lenovo understand its customers and makes for a better customer experience. Combined, this helps to
drive continuous improvement and generational lessons.
This is only the beginning of Lenovo’s customer-centric journey. It is also integrating supplier data and
additional manufacturing data to identify specific trends.
Lenovo developed a web-based application and business rules to leverage new datasets to automatically
generate return trends by product, country and consumer-reported symptoms. It published monthly return
data versus goals for each product to drive accountability and detail areas of nonconformance. It changed
its employee bonus structure to include incentives based on return rates versus goals. The implementation
of the web-based system and new key performance indicator (KPI) has enabled faster quantification of
return rates and the ability to detect key issues.
Lenovo shares this information with customers to provide evidence of performance and the
effectiveness of corrective actions. This capability has been recognized as a strength in operational
business management system meetings. Using a closed-loop system, the company provides feedback on
phone performance and customer behavior.
Call center satisfaction survey results improved after the implementation of the diagnostic application. To
improve first-time resolution, in 2017, the company added a new consumer-centric KPI to the employee
compensation payout. The ability to clearly understand the consumer’s use case and relative device
performance ensures that their issue is resolved the first time they contact the company.
19
Business Win
The improved accuracy and timeliness of returns reporting allows Lenovo to be more precise in the warranty
accrual process. New product estimates are based on the performance of the previous generation and updated
monthly based on actual return rates. The traditional methodology used validated claims and did not use
reliability statistics to normalize the time-to-failure dimension. The capability to detect issues faster and more
accurately has enabled Lenovo to pursue financial chargebacks against its suppliers when they have been
responsible for issues that caused consumers to return their devices. This offsets warranty costs and drives
additional accountability with its strategic suppliers. Lenovo recovered $16 million from suppliers in fiscal year
2017 to 2018 that were responsible for specific return drivers, with such chargeback efforts continuing.
The company employed big data techniques to store, analyze and link large sets of data to quantify
population statistics and troubleshoot individual consumer issues. It developed a new return metric to
completely characterize the consumer’s use of the product, independent of claims records. The company
used the Lenovo customer experience (CX) framework: Know me/Listen to me/Design for me/Respond to
me/Engage me, to ensure a best-in-class CX.
Social Impact
This initiative brings environmental and waste reduction benefits because fewer phones
are being scrapped prematurely.
The application to collect data and analyze the return rates has been coded and locked down under
change control. There is no human interaction on the reporting of the KPIs. All employees are rewarded on
the performance of the Total Consumer Return rate versus goals. Therefore, the results are reviewed by
both the finance and strategy teams to ensure objective reporting.
The recognition of the analytical capabilities established with the application and KPI have created
additional interest in driving enhancements to reduce the Total Consumer Return rate.
Employees are:
• Actively engaged in adding supplier and manufacturing data to provide component traceability to
identify new opportunities to detect issues, drive accountability, and reduce repair and/or scrap.
• Investigating the use of AI to increase the automation of issue detection across all reporting
dimensions.
• Linking net promoter score feedback from the customer relationship management database to device
performance data to obtain a deeper understanding of consumer dissatisfaction.
Lenovo: Driving Continuous Improvement for Greater Customer Experience
20 The Top 6 Supply Chain Breakthroughs, 2019
February 2019
Using Future-Led Execution to Redefine How Jeans Are Designed, Made and Sold
Innovation
By using laser technology in new ways, and rearranging design and production steps, Levi Strauss can finish
jeans later in the process, dramatically reducing time to market and decreasing the environmental impact —
without compromising quality or authenticity. This technology, coupled with a new operating model, unlocks
agility, delivering more of what consumers want, when they want it. The company altered its ways of working
(across design, development, merchandising, planning, production and sales) to embrace this new approach.
Impact
F.L.X. unlocks numerous benefits. By streamlining the finish design and development process, and delaying
final design decisions, it can better create on-trend products. It greatly reduces lead times from over six
months to as fast as weeks (or days in some cases) to help drive reactiveness and improve customer
service. On-demand finishing capabilities coupled with flexibility in final product decisions, reduce inventory
levels for both Levi Strauss and its channel partners.
Challenge
Levi Strauss’ challenges — along with the rest of the denim industry — include long lead times, missed
sales, unproductive inventory and manufacturing processes that, at times, can be labor-intensive and
chemically messy. The company developed a new operating model called future-led execution (F.L.X.) to
address these challenges.
21
The Business Challenge
Thirty years ago, jeans were only available in three shades: rinsed, stonewashed and bleached. Today,
those three shades have exploded into endless variations (Levi Strauss offers 1,000 different looks per
season), creating complexity and waste across the entire denim value chain. Traditional jeans manufacturing
is a complex process that requires numerous treatment steps, labor-intensive jobs and the use of chemicals
to accentuate worn, faded design patterns. This causes long lead times and creates a significant delay
between product design and on-floor selling.
As a result, major jeans companies struggle to be as reactive as the market expects in terms of style or
volume. This also means brands must commit to inventory with limited demand insight and often have the
wrong inventory on hand — translating to higher inventory levels, missed sales due to stockouts and large
markdowns on obsolete inventory.
Customer Innovation
Levi Strauss is constantly challenged to get the right products to its stores and wholesale partners
in time for Levi Strauss fans to enjoy them. It is focused on managing down inventory levels, while
balancing high service levels for customers. F.L.X. addresses these issues. By using new technology
and rearranging the steps in traditional denim production, it can dramatically reduce time to market
without compromising quality or authenticity.
Through a revolutionary new imaging tool, Levi Strauss can digitally design new worn looks (called finishes)
and translate those files to bulk manufacturing. By employing lasers and automation, it eliminates the
lengthy hand-finishing process and reduces the number of chemical formulations from thousands to
dozens. These capabilities allow a shift from a “sell what you make” model to a “make what you sell” model.
F.L.X. technology allows the company to design and finish jeans much later in the process, greatly
reducing time to market. Lead times are drastically reduced by staging unfinished garments and delaying
the final product decision, until receiving a more accurate customer-demand trigger. It also permits Levi
Strauss to better match supply with demand.
For customers, this supply flexibility enables better service levels — getting the right iconic and
trend-setting products on their shelves at the right time. The F.L.X. operating model pushes out
inventory commitment deadlines, bolstering internal confidence that on-hand inventory will be what
retail customers will buy. This helps those customers avoid stockouts on popular styles and reduces
markdowns on styles they overbought.
From an end consumer perspective, F.L.X. allows the company to short circuit the design to on-floor
time, ensuring that the consumer has access to the latest fashion. It also has the potential to enable jeans
customization. For example, the company launched a mobile F.L.X. Customization Studio in Los Angeles,
where buyers can work with a Levi Strauss designer to custom design a pair of jeans. These jeans could be
“lasered,” washed and taken home an hour later.
Levi Strauss & Co.: Using Future-Led Execution to Redefine How Jeans Are Designed, Made and Sold
22 The Top 6 Supply Chain Breakthroughs, 2019
February 2019
Business Win
Through Levi Strauss’ proprietary new imaging tool, it can create digital finish designs in a fraction of the
time and translate those files to bulk manufacturing with lasers and automation at factories — eliminating
the long, labor-heavy process of hand finishing, and thereby saving costs. By leveraging F.L.X. and
rearranging key steps in the manufacturing process, it can stage unfinished garments and delay final
product decisions until much closer to market, unlocking inventory postponement and customization
opportunities. This drives inventory productivity, helps to avoid missed sales, increases full-price sell-
through and improves efficiency.
The “real-time” customization of jeans, coupled with the inventory benefits of extreme postponement, unlocks
consumer-facing opportunities for F.L.X., from marketing activations to in-store customization studios.
F.L.X. advancements short circuit the entire go-to-market process to drive inventory productivity and
optimize sales by:
• Replacing the time-consuming, labor-intensive process of hand-finishing with automated lasers. This
decreases the finishing time, reducing the number of chemicals and overall manufacturing cost, and
improves product consistency.
• Staging unfinished garments. These can be converted into a variety of styles when the customer is
ready to commit, drastically reducing production to distribution lead times.
• Establishing on-demand and hyperlocal production capabilities. F.L.X.’s manufacturing efficiency allows
final finishing to be done closer to market in factories and distribution centers (including in high-cost
labor locations), drastically reducing lead times.
• Developing proprietary digital tools to create “photo-real” finished garments. Digitizing the finish design
and development activities streamline the end-to-end process for new products, reducing lead times.
Levi Strauss has a midterm, sustainable, competitive advantage due to the complexities of the changes
and the learning curves from the past two years of driving these modifications. Competitors will eventually
follow, but the significance of the change will take time to implement. The company has also patented
much of the technology and process.
23
Social Impact
Digitalization and laser automation of the denim-finishing process enables a responsive and sustainable
supply chain at an unparalleled scale. Digitalization of the design and development process minimizes the
need for physical sketches and samples, reducing waste in the product creation process.
Replacing hand-finishing with laser automation reduces the number of chemical formulations used in the
finishing process to a few dozen. This is a major step forward in the company’s commitment to achieving zero
discharge of hazardous chemicals by 2020. It also accelerates the elimination of many chemical formulations
that its Screened Chemistry program identified for “phaseouts.” Among the chemicals that will be eliminated is
potassium permanganate, an oxidizer that is used industrywide to replicate authentic vintage finishes.
F.L.X. delivers sustainable design and manufacturing solutions by:
• Substituting chemical-reliant, hand-finishing processes with automated lasers. Replacing the traditional
manual process with lasers dramatically reduces the number of chemical formulations.
• Replacing physical prototypes and samples with digital images. “Photo-real” denim images unlock digital
design and development capabilities, minimizing the need for new product sketches and samples.
• Unlocking recycled water finish manufacturing. Traditional finish production requires fresh water to
wash products postfinishing. F.L.X. has developed the capability to use nearly 100% recycled water.
Levi Strauss & Co.: Using Future-Led Execution to Redefine How Jeans Are Designed, Made and Sold
24 The Top 6 Supply Chain Breakthroughs, 2019
February 2019
Conclusion & Recommendations
The six Power of the Profession Awards finalists featured in this report illustrate supply chain breakthroughs
in a number of different facets and business contexts. However, their initiatives are linked by four common
themes — putting the customer experience first, harnessing the latest technologies, developing the external
ecosystem and doing right by the planet. Together, these are among the most critical drivers of supply
chain excellence today, and are worthy of both recognition and celebration.
These inspiring case examples should prompt supply chain leaders to think about how their own strategies
in these four areas are setting their companies up for success now and in the future. They also highlight
several broader lessons that all of us can reflect upon as we seek to further develop the efficiency,
effectiveness and value contribution of our organizations such as:
• Be prepared to challenge the status quo. Being “disruptive” has traditionally been regarded as too
risky in supply chain. However, in the digital age it has acquired a positive connotation. To achieve a
breakthrough in the efficiency of its production process using AI, managers at AB InBev had to overturn a
longstanding method by which filters in the brewery were replaced. At Amazon, they had to look beyond
the established U.S. logistics network for solutions to a looming delivery capacity shortage.
• Secure cultural acceptance of change. Technologies such as AI, robotics and other types of
automation can appear threatening to some employees. They naturally worry about the impact
that machines will have on their jobs, as well as mistrusting the legitimacy of unfamiliar data and
algorithms. Finalists such as AB InBev and Lenovo actively addressed these issues in their programs
by demonstrating the benefits of applying technology, not only in terms of improving decision making
and operational performance, but also in serving customers more effectively.
• Break down organizational barriers. Many companies continue to operate supply chains that
are fragmented, siloed and “functionally dysfunctional.” Our latest research makes it clear that failing
to share data and intelligence between different teams, and not working together in a coordinated
and collaborative way, will be business-limiting in the 2020s. MSD’s example of upgrading supplier
performance and development from a site-level activity to a dedicated central team with companywide
responsibility demonstrates how an integrated approach can pay dividends.
• Take pride in making a difference. People of all ages want to work for companies that embody
values they share and which push the boundaries of human progress. Levi Strauss pioneered the
use of new technology that reinvents the way a decades-old product (a pair of jeans) is made while
bringing a new buzz to the brand. Dell is leading the recycling and reuse of scarce resources, actively
addressing a major global problem — the vast quantities of plastics polluting our oceans. Every
company exists to make money. However, not many genuinely seek to fulfill a broader purpose as well.
25
1
“Supply Chain Talent
Breakthroughs, 2019,” SCM
World, A Gartner Community.
2
Although Merck was a recipient
of the Customer Innovation
of the Year award, there is
no detailed write-up for that
company in this report.
3
Future of Supply Chain Survey,
2018, SCM World, A Gartner
Community.
References
4
“Supply Chain 2025: The Future
of Work,” SCM World, A Gartner
Community.
26 The Top 6 Supply Chain Breakthroughs, 2019
February 2019
SCM World is a cross-industry learning community of the world’s most influential supply chain practitioners. Owned and managed by Gartner, the community exists to advance the profession of supply chain management.
As a community of leading practitioners we work with global chief supply chain officers (CSCOs) and their teams to provide them with a highly valuable, external perspective on supply chain. This is achieved through a combination of exclusive peer connections, practitioner-driven content and predictive research. Members of our community include Unilever, Amazon, Nike, Caterpillar, Cisco, Chevron, Dell, Nestlé and General Mills.
Subscribers to our Gartner for Global CSCOs platform gain access to the community’s forward-thinking research, which highlights ways to drive supply chain innovation. The SCM World agenda is set by its advisory board, made up of the world’s most respected supply chain experts and representatives of leading business schools.
The SCM World community strongly believes in supply chain’s increasing role in creating competitive advantage and shareholder value for business, as well as its impact on critical world issues such as the distribution of food, delivery of healthcare and environmental sustainability.
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About SCM World, A Gartner Community
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Supply Chain 2025: The Future of Work November 2018
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The aim is to balance global scale with local agility, to be more responsive to business needs and better able to support future growth opportunities.
Providing Amazing Customer Experiences Through Connected Products October 2018
It’s no longer just about designing and selling cool products. It’s about designing a highly relevant and ongoing customer experience.
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SCM World, A Gartner Community Recent Research
