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Inside Ferrero's Partner to Grow supplier day

At confectionery giant Ferrero, suppliers are central to its strategy for developing in new markets. At its second supplier-innovation day, the company demonstrated exactly why

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Travel about an hour south of Turin and you will find yourself in the heart of one of the richest culinary centres of the world; famous for red wines, white truffles and a little brown nut which has fuelled a family-owned business empire since the end of the Second World War.

 

Chocolate giant Ferrero, which started life in Alba, northern Italy, is now a multinational food giant, with revenues in the region of €11bn, headquarters in Luxembourg and, under the stewardship of Executive Chairman Giovanni Ferrero, a seemingly insatiable appetite to grow and develop into new markets.

 

Central to that growth is a laser-guided focus on research and innovation – new ingredients, new packaging, new business models – and, in turn, procurement and therefore suppliers are at the centre of that focus.

 

It’s why Alba was the scene for Ferrero’s Partner to Grow (P2G) 2018, a supplier-innovation event, that took place last June after months of hard work and detailed preparation.

Background and challenges

With this being the second P2G event, the first taking place in 2017, expectations were raised on delivering significant and lasting value to the company, as well as the partners taking part. After all, the time investment is significant on both sides.

 

The timeline for delivering the initiative successfully begins at the start of the year, as preparations begin in January (in fact, we joined the Ferrero team in November 2017 in Luxembourg to help them prepare for the event). Business challenges are then collected from colleagues during February, shared with appropriate suppliers in March before proposed solutions are received in April. The internal idea-screening process then takes place in May before the event takes place in June.

 

During the event, the morning of day one is used for inspirational speeches from senior Ferrero executives who set the scene and provide context around the strategic roadmap of the business; while the afternoon is set aside for suppliers to pitch their proposed solutions to a cross-functional project team.

 

The next day is spent evaluating the ideas and proposals put forward using the P2G evaluation tool. Immediate (that day) feedback is provided to all suppliers who took part in the day, whether that feedback is positive or negative.

 

The cadence of touchpoints is also part of the P2G programme governance model, with quarterly P2G Project updates and executive updates on progress every six months. The first Project update took place in October and it resulted in interesting insights on the innovation projects as well as the program itself.

 

You can probably predict some of the areas in which Ferrero has focused its challenges: product personalisation, product protection, tagging and tracking solutions, added-value ingredients, to name a few. By providing more detailed briefs within these challenge areas, suppliers are able to apply their thoughts on specific areas of need to Ferrero.

 

Equally, the Ferrero team seems to be very clear on their expectations of suppliers. It’s a very different process to a request for proposal, the brief is far more geared towards driving ideas and asking for potential solutions, while the process is driven by a close cooperation with suppliers to implement them.

Goal

Of course, the goal of any supplier-innovation initiative is to develop and build a pipeline of ideas and projects through which new value can flow. To achieve this goal, Ferrero focused on eight challenge areas, inviting three suppliers for each to suggest solutions to those challenges.

 

To help Ferrero project teams to assess each of the potential solutions, they completed a 20-question survey based around the five areas of feasibility, technology, ecosystem, organisation & business model and impact on business. This method of assessment then allows each idea to be plotted onto a desirability scale, which splits the proposals up into those which will be pursued, those that will be parked and longer-term pipeline.

 

To ensure the right suppliers are invited to take part in the program, Ferrero uses various methods, but at a very high level the following criteria were used: a capability and willingness to invest in innovation, attractiveness and command of a given technology, a sustainability programme being in place, and long-term, mutual benefits.

 

At the same time, the program cannot work without trust, so Ferrero asks participants to commit to cooperation and fair spirit and compliance with confidentiality and antitrust guidelines.

Solutions

There is no doubt that P2G creates a platform for innovations to travel downstream from Ferrero’s supply base into its business. It has put the governance in place to ensure that the process is repeatable and isn’t simply restricted to a face-to-face event held once a year.

 

Speaking at length to those involved in delivering the event, it was clear just how much effort had been put in. Huge volumes of collateral had been developed, preparation had been taking place for months and a significant amount of investment – both financial and otherwise – had been expended.

 

They decided deliberately not to add a KPI to the event itself, because, first, they recognise this is a long-term game, second, that it’s something the business simply has to do, and, third, the real goal isn’t aligned with the actual event but the program that lies beneath it.

 

The most important thing for Ferrero is to make the P2G process an embedded part of the business. As the P2G Core team said: “We want to walk the talk on innovation and supplier partnerships.”

 

During his presentation on the first day of the P2G event, Aldo Uva, Chief Open Innovation Officer & COO, took us through how business models are changing and how procurement can act as a gateway into new capability. To this end, he pointed to the four current innovation centres currently operating within Ferrero, based in New York, Alba, Singapore and Luxembourg.

 

And having done so, he announced the fifth – it’s P2G initiative. “We love to think that from today we will change from an event to a continuous programme,” he said. “We have an ambition to announce that P2G will become this fifth innovation hub.”

 

And with that, suppliers were put firmly in the spotlight as sources of product, process and business-model innovation to Ferrero.

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