The COVID-19 crisis put every organization under pressure. But when your products are used every day by a quarter of the world’s population, your supply chain needs to keep running regardless.
In a recent interview, McKinsey senior partner Daniel Swan talked to Shane Azzi, senior vice president and chief supply chain officer at Kimberly-Clark, about the challenges of the pandemic, his organization’s response, and what it all means for the future of the supply chain.
Daniel Swan: You have an interesting background, having spent time in the military before your corporate career. Has that experience informed your approach to leading supply-chain organizations or to leadership overall?
Shane Azzi: In the military, you learn the importance of articulating your objectives and stating clearly what it is you are about to do. Having that really clear point of view about what needs to be done has been especially important during the pandemic.
Another key lesson is about listening to the front line. While giving clear direction, you also need to be well in tune with your operation and its capabilities.
It’s been a challenging period. Running a supply chain during this global health crisis has certainly felt a bit like a military operation at times. But all supply chains need a level of structure and discipline to work well, so that part of my background has definitely helped me over the years.
Daniel Swan: The past 18 months have been just about the scariest environment imaginable for every supply-chain executive. Can you tell us what you and your team are most proud of having accomplished during the crisis?
Shane Azzi: It’s certainly been an unprecedented time, and I’m not sure any of us want to experience anything similar in a hurry. First and foremost, the thing I’m most proud of with our team has been our ability to put safety at the forefront. We prioritized the safety of everyone, from the front line of our operations to our partners, our customers, and the suppliers we work with. This enabled us to continue producing the essential products that our customers and consumers depend on every day.
These were uncharted waters at the beginning, so another thing I’m proud of is our ability to move fast. We had to do things at a speed and with a level of ambiguity we’d never experienced before. Ultimately, I’m happy that we were able to support our customers at a time when they really needed us. Every day was a different challenge, but we rose to the occasion. I could not be prouder of the way our teams worked together: keeping people safe, keeping our supply chains operational, and doing our best to deliver our essential products to our customers and consumers in trying times.
Daniel Swan: The crisis has shifted the supply chain from being a niche topic to being the subject of conversations everywhere—from the dinner table to the boardroom. Do you think that change is here to stay as companies recognize the role the supply chain plays in their overall performance?
Shane Azzi: The supply chain has certainly moved from being a back-office function to having a seat at the table. And there is an opportunity within that—as difficult as it is—when you are under duress. Supply chains have been forced to navigate severe disruption, and this feels like it will be with us for some time. There’s no easy path to get global shipping back to normal, for example. Things take time to rebalance. Then there’s disruption on the demand side, plus inflationary pressures.
Altogether, you have some pretty significant dynamics, and as businesses, we need to work through the risks and implications. There is a real opportunity now for supply-chain leaders to step up and take a more proactive role in identifying these risks, addressing them, and helping to build strategies that are more resilient. A big part of building a more resilient business starts by thinking about how our supply chains operate. Roughly 18 months ago, I barely used the term “resilient” when talking about supply chains, and now it’s becoming one of my favorite words.
Daniel Swan: Can we dig into that a little? We all know that a lot of supply chains have historically focused on productivity. Has this crisis changed your view—or the organization’s view—on the risk that you’re willing to take and how you think about the resilience that you need to build into the supply chain?
Shane Azzi: You must be able to identify the risk before you can do anything about it, so the first step toward resilience is understanding your exposure. I think what we learned—and continue to learn through the ongoing disruption—is that you’ve got to have visibility to what you are trying to manage.
Then it’s about making the choices to insulate yourself from the disruption. We can’t do everything, so it’s about being clear about where the risk sits and being really targeted in our actions. That’s probably an area where we’ve had to work hard because, like many companies, we don’t always have the full picture.
That’s why digital becomes such an important part of the solution—because you’ve got to have that end-to-end picture. We must be able to see emerging risks further upstream and downstream than ever before.
Daniel Swan: Could you give us some examples of the actions you are taking in the digital arena to drive transparency, improve resilience, or increase productivity?
Shane Azzi: We’ve been on this journey for some time, and we’re really starting to lean into digital: what it does, what its implications are, and so on. The need for digital solutions is very clear, given the amount of information we need to first absorb, then process in near real time. Digital strategies support the resilience we require—it’s a mindset that revolves around action, reaction, and counterreaction.
We’ve been working in the area of digital manufacturing, where we have a pretty well-defined program. Right now, we are working through the whole area of logistics—and planning in particular. We are making our planning systems capable of taking information from much further upstream in our supplier base.
We’ve already done some good work over a number of years around demand sensing. Now the focus is on connecting this more so we can reprocess some of our planning decisions almost instantaneously. That ability to replan the business becomes incredibly important when you want to respond to changes at a faster rate.
The pandemic has really shown us that it’s one thing to have your arms around your own operations but another when you have to deal with industry-wide issues. Digital facilitates our ability to see the level of information we need to operate effectively and efficiently across the chain.
Daniel Swan: This idea of an end-to-end approach to the supply chain is a powerful one, especially when you accept that end to end involves a lot of elements that are outside your organization’s direct remit. Can you comment on the progress that you have made in that area?
Shane Azzi: This is definitely a hard one to crack because it requires a level of collaboration that is probably deeper than we’ve gone and more instantaneous than we’ve been in the past. We’ve had to get much more real time in understanding the material flows of our suppliers—for example, particularly where we have extended-lead-time supply chains. Given the current state of ocean freight around the globe, we need a really clear understanding of our suppliers’ production schedules and logistics plans and when they will actually be able to get containers on the water.
We are already using digital platforms to monitor in-transit shipments within our own network, and this is about extending that approach to long-lead-time supply chains and ocean freight. It is taking the control-tower concept that we already have, which gives us great visibility inside our own operations, and extending it further upstream and faster than we ever thought we would. We want that upstream visibility because it gives us the opportunity to make different decisions early enough in the cycle to impact the outcome that we’re looking for.
Daniel Swan: One of the big changes in consumer behavior during the pandemic has been a dramatic acceleration of the shift to e-commerce. Is that something you are experiencing at Kimberly-Clark?
Shane Azzi: Yes, it’s real. In certain categories, we are seeing much more volume moving through e-commerce channels. So we need to be able to meet the expectations of the consumer for short lead times.
And that creates challenges. Lead times are increasing on the upstream side, while consumers want shorter lead times. That calls for a focus on fulfillment strategy. It’s about being able to position inventories in our network closer to the point of demand and then get the throughput required from our distribution networks.
All CPG companies came through the school of full pallets, full truck loads, and at-scale operations. While there is an element of our operations for which that will always hold true, we also need the ability to flex down to the individual case or the individual product and be able to ship that to the consumer.
That poses some interesting challenges around the flexibility you need in the fulfillment center. You need to rethink your packaging architecture to make sure you have a suitable product that you can put through the network. You need multirole facilities or, in some cases, dedicated and focused facilities.
Those challenges will actually help to reinvent our supply chains. Automation is also going to play a role because once we get into high-volume manual tasks, we need to look at how we incorporate automation to increase velocity. This part of our business is continuing to grow and evolve, and I don’t see it moving back.
Daniel Swan: All this ongoing change in the supply chain is having a big impact on the capabilities you need within the supply-chain team. How is Kimberly-Clark responding to that challenge?
Shane Azzi: There’s a real shift happening now between the art and science of the supply chain, and it’s definitely rebalancing more toward the science. That’s clear just from the volume of data we are required to assess and base decisions upon on a pretty frequent basis. And because of the dynamic nature of the environment, optimizing the supply chain today looks a lot a different from 20, ten, or even five years ago. By necessity, we need to become more systems driven—no human can process the sheer amount of data in the time available.
What we are learning in this situation is that we can make decisions much faster when we become more data driven. That’s an area we’re continuing to focus on—getting the right data, then moving quickly to draw insights from that data. There’s a whole subset of activities that you need to let the system drive. Our ability to accelerate and improve the quality of our decision making relies on the ability to systematize the work and then apply the right understanding to draw insights from the data.
We’re continuing to put the focus on developing our people in that space. It’s a lot of learning by doing, and we’ve had the perfect laboratory over the past 18 months to do just that. By necessity, we’ve really brought some of these solutions through sooner than we would have expected. I’m really pleased with our team’s ability to respond to what has been a pretty significant digital transformation on a large scale.
Daniel Swan: Another thing that has become a big topic of conversation recently is worker shortages and the problems associated with finding the right talent, whether that’s in distribution centers, manufacturing, or transportation. How do you ensure that Kimberly-Clark keeps winning the talent battle?
Shane Azzi: It has certainly been an unprecedented time in terms of the labor challenges we’re facing across numerous industries. That has forced me to think about the real core of our work. We need to be clear about the core value pieces of our operation and then work out how we maintain a workforce that’s capable and ready.
Ultimately, you need a little bit more depth in your organization. Again, I’ll come back to the word “resilience.” It’s challenging in our operations right now because it’s not the smoothest road every day. We need to create the right value proposition so that people want to come into our operations. They’ve got to see the value they can create in these roles—the significance of providing essential products to one-quarter of the world’s population on a daily basis.
Our supply-chain teams played an incredible role through the pandemic, and supply chain came to the front a little bit more. That hasn’t always been our style, because supply-chain teams tend to fly a bit below the radar. But this is forcing us to be more visible. It’s an exciting place to work, and we must make people see the opportunity they have to impact business performance and deliver on our purpose.
That said, we also need to focus on how we define various roles. We need to use automation smartly and put people in the roles where they are going to add the most value and be the most engaged. There’s still a lot of routine work in the supply chain that has the potential to be handled in different ways. With fewer workers available, we need to find the optimal mix of technology, automation, and the ability of our people to make the ultimate decisions and operate the system.
Daniel Swan: Sustainability is another one of the most important topics of the day. Can you tell us a little about your historical approach to environmental sustainability and how that may have changed as we’ve gone through the pandemic?
Shane Azzi: Maybe some people think that supply-chain practitioners have forgotten about sustainability because we’ve been consumed by the pandemic. In fact, it’s absolutely at the forefront for us because every day is about operating with the smallest environmental footprint possible. There’s real value in that, and our people believe in it passionately and want to move even faster. Keeping people safe while also safeguarding our natural resources is paramount for us.
There’s an opportunity as we come out of the pandemic to increase the focus on digital and sustainability. Those are the two biggest things that are going to influence the supply chain as we move beyond the current situation.
You can see how digital and sustainability complement each other by looking at energy. That’s an area where we’ve done a lot of work, exploring alternative energy sources and also making our energy consumption more transparent to our operators through our manufacturing-execution system. That really helps to bring to life the whole energy equation in our decision making and identify opportunities to reduce our footprint even further.
We’ve made steady progress over the last number of years, but now we really feel the urgency to move forward with a different level of intensity. We announced some ambitious sustainability goals for 2030, which include cutting our environmental footprint in half in the areas where we can make the biggest difference: plastics, climate, water, and forests. This is part of our global ambition to improve the lives of one billion people in underserved communities around the world by 2030 with the smallest environmental footprint, and our teams are committed to making the right decisions to get us there.
Daniel Swan: Last question: Where do you think the supply chain is going? Are today’s issues here to stay, or will you be thinking about different challenges in two or three years?
Shane Azzi: For the supply chain, there has been an awakening. We have a bigger role to play than perhaps we once thought. That role involves the ability to plan and define which scenarios will meet the challenges of the day. Adjusting on the fly isn’t going to be easy when you have big operations and significant infrastructure. It’s going to be about how we respond when we see a signal or a pattern that’s not normal. How do we adjust? It’s paramount that we get deep into the data to understand supply-chain performance and the factors that affect it.
There’s also going to be a lot of work around physical automation. With ongoing labor shortages, using more automation to do the routine work is a given. But at the end of the day, we can all have similar kinds of systems, similar robotics, and similar engineering infrastructure. The biggest differentiator in supply-chain performance is going to be the ability to see the situation, anticipate, and respond. Our people will make the difference.
I’ve been really impressed with all of our operational teams across Kimberly-Clark. We’ve demonstrated our ability to meet the moment and work through the ambiguity that sometimes comes in the world of operations. Now, I’m excited to capture that learning, enhance that mindset, and bring it into how we design and operate going forward to deliver on our purpose of better care for a better world.