Diageo, Celebrating Life, Everyday, Everywhere

Diageo, Celebrating Life, Everyday, Everywhere

 By Juntong Lu and Jon Drury

Diageo is an alcohol beverage company that is headquartered in London, England. It is the largest producer of spirits and sells its wide array of products in over 180 countries worldwide.  Their most notable brands contain Smirnoff vodka, Johnnie Walker whiskey, Bailey’s Irish liqueur, Jose Cuervo tequila, and Guinness stout.

Because Diageo is so immense in size and due to the specific nature of their product, they must source their materials from approximately 30,000 businesses through varying supplier relationships. The relationships with these suppliers are hugely important, because effective logistics and distribution at the local and regional level is the key in the drinks industry.  By using and cultivating these mutually beneficial relationships, Diageo effectively employs the CPFR model, and thus, is able to achieve success within its supply chain.  Additionally, Diageo has pledged to actively manage the moral and social risks within its local supply chain communities through a 4-step process laid out on their website, which includes continuous reviews and audits of its suppliers.  More recently, Diageo has revamped its supply chain strategies in an effort to more effectively take advantage of the available data in information streams in hopes that it “will play a more integral role in how the company plans to enter new markets faster and more efficiently” by improving “overall oversight and visibility” (Diageo).  Looking at their customers, Diageo actively seeks the reviews of its customers in an effort to maintain the best possible service and increase their customers’ returns.  In all aspects of their multidimensional supply chain, Diageo places a heavy emphasis on community, environmental, and ethical responsibility.

Although the company was just founded in 1997, Diageo has experienced a rapid growth and now become the leader of the drinks industry. People trust one of the main reasons why it can have such a booming development within only 17 years is because the company has a very efficient management team, which they called the "Operational Excellence Team". The management team’s responsibility is to develop the four core supply chain processes --- ‘Plan’, ‘Make’, ‘Move’ and ‘Technical’. In each area, the management team will try to draws on both external and internal practices and find out the best standards to follow in that market. The team’s director, Gerry O’Hagan has said that “the Operational Excellence Team is just like the glue to hold the strategy and performance improvement processes for the supply chain whole” (O’Hagan). As the company goes from a regional corporate to a global organization, Diageo is always trying to establish a capability development program to enable its managers to understand the possibilities of outstanding and efficient supply chain management, and helping them understand the governance requirements.

With the rapid expansion over these years, Diageo indeed meets some threats. One of them is the sustainable development problem. As a global enterprise, Diageo believes that the main threat for a company is the violation of the balance of the social ethics and company profits. Because of this, Diageo has focused on establishing a structure to monitor these risks and work with suppliers to mitigate the influence. Diageo has set up a global framework to process the raw material sourcing. It has also created a sustainable agricultural sourcing guideline to managing particular supply chains more effectively. It aims to contribute to the economic sustainability of local communities with a policy of sourcing ingredients from local farmers. Diageo has spread throughout over 180 different countries in the last decade, and the growing demand in these emerging economies has caused Diageo to rebuild their production and distribution networks. As a precautionary, Diageo has regionalized its supply chain into several large districts to help companies reduce the costs for the impact of disruptive events such as war, earthquake, hurricane and tsunami. If something happens suddenly, those affected areas can be served temporarily by supply chains in neighboring regions and the company's market share will not be affected.

References:

http://en.wikipedia.org/wiki/Diageo
http://www.youtube.com/watch?v=tn0RRhoZsnw
http://www.diageo.com/en-us/csr/valuechain/Pages/suppliers.aspx
http://sloanreview.mit.edu/article/reducing-the-risk-of-supply-chain-disruptions/
http://www.logisticsmanager.com/Articles/21560/Diageo+moves+supply+chain+closer+to+the+customer.html
http://info.lightwellinc.com/blog/bid/145795/Diageo-plans-supply-chain-visibility-and-reporting-enhancements