CSCMP Quarterly Dialog with Lou Arace

1. Dialogue
[CSCMP MEMBER PROFILE]
NAME: Lou Arace
duct. We use this information to map out our entire TITLE: Senior Vice President, Chief Supply Chain Officer
business strategy, from the consumer all the way back ORGANIZATION: NutriSystem
Lean
through the supply chain to our suppliers’ suppliers. …
A typical business process contains 95 percent waste ▪ Bachelor of Science degree, Messiah College
and only 5 percent value-add. Our goal is to eliminate ▪ Master of Business Administration Degree, Pennsylvania
that waste, and home in on what the customer really State University
wants and is willing to pay for.
Involving every team member throughout the sup-
leadership ply chain is key to successful lean process improve-
ment. Any organization can implement new practices
or change logistics networks, but your people are your
only appreciable asset. Lean forces us to enlist every-
one’s help in working toward continuous improve-
ment. You can’t build a true culture of innovation and
ing network efficiency through a total supply chain
cost model. Most companies tend to focus their net-
work design solely on outbound shipping costs. Our
model was designed to reduce supply chain costs in
accordance with our CSP.
NutriSystem is experiencing phenomenal efficiency unless your entire team works together. DOES NUTRISYSTEM MANUFACTURE ITS OWN
growth. Customer-focused, “lean” supply chain PRODUCTS, OR IS THAT FUNCTION OUTSOURCED?
WHAT INNOVATIONS HAVE YOU IMPLEMENTED TO We currently maintain a network of suppliers and
management is fundamental to the company’s IMPROVE YOUR SUPPLY CHAIN? partners to manufacture our products.
We’ve implemented a customer-focused Customer
success, says Chief Supply Chain Officer Lou Arace. Service Policy (CSP) that details exactly how we are HOW DO YOU MAINTAIN QUALITY CONTROL, FROM
going to serve our customers on a daily basis. Our goal THE MANUFACTURER TO THE DISTRIBUTION CENTER
IT’S ONLY FITTING that Lou Arace manages the WHO IS YOUR TARGET MARKET? is to increase the level of customer value through the AND FROM THE DC TO THE CUSTOMER?
supply chain at NutriSystem, a provider of weight NutriSystem’s target market is busy people. Many delivery of the perfect order, as well as to lower our We have rigorous certification, process control, and
management products and services. The company of our clients want to lose weight without count- total supply chain costs. audit activities throughout every step of the supply
is built on a supply chain strategy that, like ing points, shopping for groceries, going to meet- Next, we optimized our distribution and logistics chain that drive both compliance and continuous
CSCMP member Arace, is all about “lean.” ings, or doing public weigh-ins. networks using a total supply chain cost model. Our improvement in our quality standards. Quality is a fun-
NutriSystem moved to an e-commerce, direct- CSP drove our network design and inventory, ven- damental principle in effective supply chain manage-
to-consumer business model in 2004, satisfying an WHAT IS THE FOCUS OF YOUR SUPPLY CHAIN dor/partner, and procurement strategies. ment. You can’t have speed or low cost without quali-
unfilled need in the consumer marketplace: a STRATEGY AT NUTRISYSTEM? We’ve all heard the phrase “no one shrinks to great- ty processes built into every step of your supply chain.
nutrition-based, easy-to-use weight-loss plan that The focus of our strategy is to deliver the “perfect ness.” For me, effective supply chain management is
ensured privacy without requiring a major time order” to our customers. We define the perfect more about enabling a growth strategy than it is about HOW HAS YOUR CSCMP MEMBERSHIP ROUNDED
commitment. The result has been exponential order as one that is delivered 100-percent com- developing a cost-reduction strategy. If you continual- OUT YOUR CAREER?
growth, from annual revenues of US $34 million plete, 100-percent on-time, with perfect quality. ly deliver exceptional customer value while driving My CSCMP membership provides me with instant
to nearly US $800 million in four years. Our goal is to utilize the principles of lean supply out waste in every process, you will facilitate growth, access to changing trends in logistics and supply chain
Prior to joining NutriSystem in 2007, Arace chain management to deliver the perfect order at innovation, and cost improvements. management. It is critical that we, as supply chain
was senior vice president of global operations for the lowest total supply chain costs. professionals, stay linked in to cutting-edge informa-
Cardone Industries, a supplier to the automotive WHAT SPECIAL PROBLEMS DID YOUR SUPPLY CHAIN tion and the latest issues impacting our profession.
aftermarket industry. In his current position of “LEAN” HAS BEEN THE CORNERSTONE OF YOUR IMPLEMENTATIONS SOLVE OR OVERCOME? CSCMP also helps us examine a wide cross-section of
senior vice president and chief supply chain offi- CAREER. HOW HAVE YOU APPLIED LEAN SUPPLY NutriSystem has grown at an astounding rate. It’s not industries to identify best practices that can be applied
cer, he is responsible for all aspects of CHAIN CONCEPTS AT NUTRISYSTEM? easy to optimize your supply chain while your compa- to supply chain management.
NutriSystem’s supply chain, including procure- Lean thinking has been the foundation of my ny is experiencing such phenomenal growth. Our During economic times like these, more and more
ment, supplier management, food quality and operations and supply chain experience. I believe focus has been to enhance our infrastructure to allow companies are looking to supply chain management
safety, logistics, distribution, transportation, in its principles because they’re simple and can be for even more efficient scalability while continuing to professionals to increase revenue and manage costs.
demand/supply planning, inventory deployment, applied to any process. deliver the best customer experience possible. CSCMP is integral to my journey of lifelong learning
and continuous improvement. Most supply chain improvement efforts focus by offering me state-of-the-art operational knowledge
In a recent conversation, Arace described how solely on reducing costs, and they tend to overlook HOW DOES NUTRISYSTEM’S DISTRIBUTION SYSTEM across all industries.
supply chain management and execution make it the customer experience. … Our customers readily SUPPORT ITS BUSINESS GOALS?
possible for NutriSystem to deliver on its commit- provide us with terrific feedback about what they Our distribution and logistics network is based on a
ment to provide the perfect customer experience. want and need in the numerous surveys we con- regional distribution model that expedites our cus- MADELEINE MILLER-HOLODNICKI, ABC, IS CSCMP’S MANAGER OF
tomer service policy. The goal was to optimize time- COMMUNICATIONS. SHE IS THE EDITOR OF CSCMP SUPPLY CHAIN
[BY MADELEINE MILLER-HOLODNICKI] definite delivery of the perfect order, while maximiz- COMMENT AND SENIOR EDITOR OF CSCMP’S SUPPLY CHAIN QUARTERLY.
24 CSCMP’s Supply Chain Quarterly [QUARTER 4/2008] www.SupplyChainQuarterly.com www.SupplyChainQuarterly.com [QUARTER 4/2008] CSCMP’s Supply Chain Quarterly 25