Whether it\u2019s the Rocher chocolate you buy for your Valentine\u2019s date or the Nutella spread you eat as your guilty pleasure, Ferrero\u2019s brands are well known globally. A leading Italian manufacturer and producer of high-quality branded chocolate and confectionary products, Ferrero has consistently focused on innovation in its production and packaging processes. It has, for instance, continually invested in research to implement advanced automation on its production lines [1].<\/p>\n
While product innovation remains critical, Ferrero has become more focused on better managing the complexity of its procurement process. Generally, the food business has particularly intricate supply chains with distinct silos due to the various ingredients necessary to produce a single food product. Companies, therefore, have to deal with numerous suppliers [2]. Think about the ingredients that go into Ferrero Rochers: milk chocolate made from sugar, cocoa butter, cocoa mass, skim milk powder, anhydrous milk fat, lecithin, vanillin and then hazelnuts, sugar, modified palm oil, wheat flour, whey powder, cocoa, lecithin, sodium bicarbonate, salt, and vanillin [3]. Due to all the suppliers needed for these ingredients, a complex supply chain can crumble if one supplier doesn\u2019t deliver its services. It can become expensive and inefficient if the whole process is not handled effectively. Thus, companies must find a way to combat mounting pressures on procurement to generate results at a lower cost and risk as the competitive landscape intensifies [4].<\/p>\n
What is Ferrero doing about this? Whereas previously it was using separate, independent systems to deal with its elaborate procurement process, it now recognizes the value of and need for digital technology to create an integrated approach. Ferrero announced last month that it will implement SAP Ariba software to help manage costs and risks throughout its procurement practice. According to Jane Scott, Ferrero\u2019s CIO, this is an \u201cintegrated platform on which we can consolidate all of our spend and collaborate with a global network of partners on everything from sourcing and orders through invoicing and payment\u201d [5]. Ferrero will use several cloud-based applications, including strategic sourcing, supplier risk, spend analysis, commerce automation, buying and invoicing, and supply chain collaboration. As Paul Devlin, General Manager at SAP Ariba explains, through this digital technology \u201cinnovative companies like Ferrero can manage the entire buying process from source to settle, while controlling their spend, minimizing their risk, identifying new sources of savings and building a healthy, sustainable supply chain \u2013 all in one place\u201d [6]. With the implementation of a digitized procurement system, Ferrero can maximize its efficiency and effectiveness, whereby enhancing the transparency and collaboration of the entire supply chain [7]. Further, this platform allows more inputs to be linked, allowing improved decision-making, insights, and strategies [8].<\/p>\n
Long-term, Ferrero is focused on taking the digital technology now used in its procurement procedures to other parts of its supply chain and operations. The company recently set up an innovation lab at Cornell University\u2019s technology campus to examine potential technological improvements to its systems and products [9]. While using platforms like SAP Ariba are instrumental to Ferrero\u2019s ability to advance its supply chain, its own research may allow it to develop tailored technological solutions to company issues.<\/p>\n
Although companies are slow to adopt digital technology for their procurement processes, Ferrero has proven its desire to invest for the future and stay ahead of the competition [10]. To continue moving in the right direction, Ferrero needs to keep investing in progressing the digitization of its supply chain. It should consider opportunities that\u2019ll enhance the predictability and visibility of its supply chain and drive greater cooperation with suppliers. Given its inherently complex supply chain, Ferrero should test how different digital technology tools might improve its processes.<\/p>\n
I am left with two concerns. Should companies develop their own technological platforms or outsource them as Ferrero did with its procurement process? Lastly, how can companies continue to invest in digital technology when they have tight operating budgets?<\/p>\n
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Sources<\/strong><\/p>\n [1] Ferrero U.S.A., Inc, \u201cResearch, Technology,\u201d https:\/\/www.ferrerousa.com\/fc-939\/.<\/p>\n [2] Anni McLeod and Will Hueston, \u201cOverview of the Global Food System: Changes over Time\/Space and Lessons for Future Food Safety,\u201d Institute of Medicine (US). Improving Food Safety Through a One Health Approach: Workshop Summary<\/em> (Washington, D.C.: National Academies Press, 2012). https:\/\/www.ncbi.nlm.nih.gov\/books\/NBK114491\/.<\/p>\n [3] Ferrero Canada, \u201cFerrero Rocher,\u201d http:\/\/www.ferrero.ca\/our-brands\/ferrero-rocher\/a-roasted-hazelnut.<\/p>\n [4] Oliver Wyman, \u201cDigital Procurement: From Myth, to Unleashing the Full Potential,\u201d Operations,<\/em> 2017, http:\/\/www.oliverwyman.com\/content\/dam\/oliver-wyman\/europe\/france\/fr\/Publications\/Digital_Procurement.pdf.<\/p>\n [5] SAP Ariba, \u201cProcurement Gets Sweeter at Ferrero with SAP Ariba,\u201d https:\/\/www.ariba.com\/about\/news-and-press\/procurement-gets-sweeter-at-ferrero-with-sap-ariba.<\/p>\n [6] SAP Ariba, \u201cProcurement Gets Sweeter at Ferrero with SAP Ariba,\u201d https:\/\/www.ariba.com\/about\/news-and-press\/procurement-gets-sweeter-at-ferrero-with-sap-ariba.<\/p>\n [7] Oliver Wyman, \u201cDigital Procurement: From Myth, to Unleashing the Full Potential,\u201d Operations,<\/em> 2017, http:\/\/www.oliverwyman.com\/content\/dam\/oliver-wyman\/europe\/france\/fr\/Publications\/Digital_Procurement.pdf.<\/p>\n [8] Deloitte, \u201cThe Future of Procurement in the Age of Digital Supply Networks,\u201d Digital Procurement,<\/em> 2017, https:\/\/www2.deloitte.com\/content\/dam\/Deloitte\/us\/Documents\/process-and-operations\/us-cons-digital-procurement_V5.pdf<\/p>\n [9] Keiko Morris, \u201cChocolate Giant Ferrero to Look for Innovation at Cornell Tech,\u201d The Wall Street Journal<\/em>, August 27, 2017, https:\/\/www.wsj.com\/articles\/chocolate-giant-ferrero-teams-up-with-cornell-university-1503857457.<\/p>\n [10] Nic Walden, \u201cFour key areas for digital transformation in procurement,\u201d Supply Chain Digital<\/em>, April 28, 2017, http:\/\/www.supplychaindigital.com\/procurement\/four-key-areas-digital-transformation-procurement.<\/p>\n","protected":false},"excerpt":{"rendered":" Investing in digital technology is allowing Ferrero to better manage its complex procurement process.<\/p>\n","protected":false},"author":10388,"featured_media":25581,"comment_status":"open","ping_status":"closed","template":"","categories":[3991,1516,3513],"class_list":["post-25441","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-digital-technology-and-supply-chains","category-ferrero","category-procurement","hck-taxonomy-organization-ferrero","hck-taxonomy-industry-food-and-beverage"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/rc-tom-challenge-2017\/","yoast_head":"\n