2. ME50320 International Networks for Production, Service & Logistics 20.04.2016
Introduction
Guinness – “the Black Stuff” – has been brewed for over 250 years at it’s St. James’s Gate
brewery in Dublin since 1759, where the founder Arthur Guinness ostensibly signed a 9000
year lease for the site (Reese, 2007). Since 1769 Guinness has been exported, first to Great
Britain, then increasingly further afield, and is now enjoyed around the globe. According to
their website Guinness is brewed in more than 50 countries and sold in over 100
(Guinnesscom, 2016). Such a global brand requires careful management right across supply
chain (SC) in order to ensure timely delivery of product to customers around the world, which
is to be the focus of this paper. This paper will explore the international networks involved in
the production, service, and logistics at Guinness. It will examine the SC and links in the
logistical network, highlight points of weakness and what Guinness has done to mitigate
these, and the improvements that decisions by the firm have had on operations within the SC
and international networks.
Serving the markets
Guinness is brewed in multiple countries around the world however every glass contains a
little taste of Ireland due to the unique wort brewed at St. James’s Gate that is distributed to
every production facility to be added during the brewing process. In 2007 production at St.
James’s Gate accounted for approximately 80 percent of all Guinness brewed and sold
globally. The four largest markets are Britain, Ireland, Nigeria, and America (Fabb, 2007; Cilt
world, 2007). In the past decade sales at home in Ireland and in the UK have been in decline,
while the American and Nigerian markets have shown increased performance (Harrison,
2007; Fabb, 2007; Griffiths, 2004; Madichie, 2008). This has likely been a major contributing
factor of the firms decision to invest $400 million to expand production capabilities in Nigeria
between 2004 and 2009 (Madichie, 2011), where they have had a presence since 1962
(Purefoy, 2009), allowing for it’s Irish site to focus on serving the American markets and
Nigeria to focus on Africa nations. Due to greater frequency of activity between Ireland and
the American markets this will be the focus of attention for this paper.
Since it entered the international market shipping has been the transportation method of
choice for Guinness. For the past 100 years Guinness has owned its own vessels, updating its
fleet regularly (Bourke, 2016). More than 14,000 barrels are shipped from Dublin every day
(Cilt world, 2007). Small feeder vessels depart from Victoria Quay on the Liffey (Bourke,
2016). The UK is the first stop, either Liverpool or Southampton, and then on to the deep sea
port in Rotterdam. From here the majority is transferred onto larger ships to be taken up to
the North Sea and out into the Atlantic to be delivered to ports on the American continent and
beyond. The rest is sent by rail or road to European markets (Cilt world, 2007). Serving
markets that are spread out across every continent requires careful planning and
coordination at every stage of the supply chain in order to ensure a continuous flow of beer at
the taps right around the globe. Of concern is the phenomena known as the Bullwhip Effect,
which illustrates that, even minor disturbances can rapidly become amplified as they transfer
along the SC (Lee et al. 1997). As Figure 1 below shows there are multiple steps involved in
the SC. The Bullwhip Effect dictates that the more links in the SC, the more chance there is for
delays to occur. This presents problems for Guinness, and any firm involved in international
networks.
3. ME50320 International Networks for Production, Service & Logistics 20.04.2016
Figure 1: Model of Guinness Supply Chain (simplification)
Getting the right measure of things
Managing the supply chain of a global brand is a complex task and for Guinness a key factor of
measurement is customer service and satisfaction. In 2003 Andy Cullen was tasked with
measuring the SC in order to discern its condition, and to make any necessary improvements
(Reese, 2007). In accordance with SCOR Metrics, reliability was the key measure used to
gauge performance; goods needed to be dispatched at the right place, time, quantity, quality,
price, and with the right support. Guinness called this metric “on time in full on dispatch"
(Reese, 2007). Results showed that “customer service numbers looked pretty good: 99-100
percent month after month” (Reese, 2007).
The initial figures for dispatched goods appeared positive. However, timely dispatch of goods
does not guarantee timely delivery. Unfortunately, the shipping industry cannot be depended
upon for reliability and it is characterised by a great deal of earliness and tardiness (Chen,
1996; Chung et al. 2013). Pacific Shipper (2007) summarised market data gathered by
London's Drewry Shipping Consultants. It showed that average on-time arrivals were in the
40-60% range for the container industry, with trans-Atlantic routes coming in as low as 27%.
The survey conducted by Vernimmen et al. (2007) supports these findings, which showed that
“more than 40% of the vessels deployed on worldwide liner services arrived one or more
days behind schedule.” This is reflected among companies within the shipping industry. A
Logistics Today (2007) poll showed that “frequent late arrivals” affected 48% of respondents.
A break down of shipping volatility by Notteboom (2006) shows that: 93.6% are attributable
to port operations, 5.3% are because of weather conditions or mechanical problems at sea,
0.9% are because of delay when transiting canals, and 0.2% owing to unexpected wait time at
bunkering sites. This is evidence of errors that lead to delays in the shipping industry and as
Guinness largely relies upon shipping this affects their delivery times. For those shipments
affected a journey that usually takes approximately “21 days to New York, and up to 33-36
days to Los Angeles” (Reese, 2007) will be drawn well into a second month.
Cullen soon realised that metric being used to measure customer satisfaction did not
represent the true customer views. Guinness had been measuring the wrong metric,
relinquishing responsibility once barrels were loaded safely onto feeder vessels. Once this
error was realised he looked at changing the measurement metrics from OTIF on dispatch to
4. ME50320 International Networks for Production, Service & Logistics 20.04.2016
"on time in full on arrival” (“OTIF on arrival”) (Reese, 2007), which saw Guinness responsible
for barrels until being received by the customer. This meant the need to monitor each barrels
journey until it arrived at the customer’s premises. This is a complex job with many potential
places for problems to occur. In order to do improve results a new sophisticated system was
needed to give accurate data in real-time right across the SC.
Performance measurement and improvement
Due to the complex nature of SC’s increasing numbers of businesses are turning to technology
and computer tools to help with complex business processes such as SC management.
Business Intelligence (BI) is a relatively new development in the lifetime of computers.
According to Cebotarean (2011) “BI technologies provide historical, current, and predictive
views of business operations. Common functions of business intelligence technologies are
reporting, online analytical processing, analytics, data mining, business performance
management, benchmarking, text mining, and predictive analytics. Business intelligence aims
to support better business decision making.” There are a great number of BI softwares
including “IBM Congos, SAS, MicroStrategy, Actuate, and more” (Abzaltynova et al. 2009).
Until now Guinness had used the BI tool Manugistics (now JDA) for supply chain management
and manufacturing planning (JDA, 2016). However, Cullen wanted "something a little bit
different, a little bit leading-edge" (Reese, 2007) that could monitor the SC, receive accurate
real-time data at each stage, and help with production planning accordingly. SeeWhy (now
part of SAP), which brands itself as the “real-time Business Intelligence platform", was
selected for the job (SAP, 2014).
According to Ziora (2012) Real-time Business Intelligence (RTBI) “can be especially useful at
operational level… where information needed for the purpose of decision taking should be up
to date and nearest real-time as much as possible.” Further, it can speed up the decision
making process by offering “real time marketing, fraud detection, optimization of supply chain
in logistics etc.” (Ziora, 2012). This enables SC managers to make faster decisions by
simplifying the decision process by “giving the correct information to the right people” (Tank,
2015). Different operators and information systems across the network can communicate
with each other directly meaning that a lag is picked up on and can be adjusted for with all
relevant actors being made aware. This can lead to reduced delays and costs, and also
improve response to disruptions, smoothing supply levels right across operations. Tank
(2015) further points out that by having information readily available managers can respond
to customers quicker, which reduces company costs and increases customer satisfaction. It is
recognised that initial investment required is “more costly than “traditional” Business
Intelligence systems… and RTBI implementation may sometimes be more costly as well”
(Ziora, 2012). Implementation can involve SC mapping, installing chips and software at
strategic points, training of SC staff, among other tasks that require expensive resources.
Results and implications of SeeWhy
At the time SeeWhy was a relatively young company and were able to work closely with
Guinness to determine the right metrics to be measured and to implement the necessary tools
for measurement at each point in the SC, such as microchips and software installation.
According to Reese (2007) after switching to the OTIF on arrival metric the picture no longer
looked as good for Guinness with customer service levels “barely breaking 50 percent”;
clearly improvements were needed. Through implementing SeeWhy right across the SC,
communication and data improved, leading to increased effectiveness of operations. Cullen
5. ME50320 International Networks for Production, Service & Logistics 20.04.2016
reported that, “the metric currently hovers around 80 percent. We could push it up further,
but if we did that we'd have an increased number of shipments arriving early" (Reese, 2007),
which would not be desirable. Improving operations by 60 percent is great news for any
business and there were additional benefits to implementing SeeWhy. The information and
data made available enabled Guinness to see that one of the “most competitively priced
shippers is producing very good customer service” (Reese, 2007), enabling them to achieve
greater value of transportation for barrels. Interestingly Cullen disclosed that, “in the past, to
be honest, we would have probably gone for our most expensive carrier in the belief that they
offered the best customer service because we simply didn't have the visibility to know any
better" (Reese, 2007). Through having more accurate data that is updated in real-time
Guinness is able to make better-informed decisions about shipments that ultimately save both
them and their customers’ time and money.
Discussion
Through implementation of RTBI Guinness have been able to build a more accurate picture of
their SC and those international networks at play. Better understanding of these networks can
enable Guinness to improve performance within existing markets. However, Fabb (2007)
showed that UK sales declined 13% in the last two years and fell nearly 30% in Ireland since
2001. This is echoed by Michael Patton Diageo Ireland’s corporate relations director who
stated that "The problem is they are consuming less Guinness than before" (Harrison, 2007).
This shows that while SC management is important, it is not the only factor that influences
customer satisfaction and sales of Guinness, which was the motivation for the SC review. If the
claims about RTBI are accurate then it would be reasonable to expect to see increased
performance of sales for Guinness, this however, does not seem to be the case in the UK and
Ireland. It should be considered that the raise in awareness of the health risks of alcohol
consumption might be a factor contributing to weakened sales. Further, the UK and Ireland
are considered home markets for Guinness, involving fewer international networks.
Therefore, the benefits of RTBI are likely to have reduced improvement on performance in
these markets.
Conclusion
With over 250 years heritage at Guinness and it’s founding brewery at St. James’s Gate the
firm has built up a large international network of suppliers and distributors that help feed
customers around the globe. As Guinness has made a presence in an increasing number of
countries, serving these markets has required improved planning and coordination at every
stage of the supply chain. Through enlisting SeeWhy to implement RTBI across the SC
Guinness has been able to map and analyse these complex interactions in order to better
understand the processes involved and customer satisfaction levels. This information has
enabled them to improve operations as well as to mitigate negative effects when disruptions
do occur. The implications of SeeWhy, and RTBI, for firms with an international network that
extend to foreign markets can create greater efficiency of operations and improved
performance. The case of Guinness has shown that deeper insight into the SC has generated
key decisions regarding shipping agents used, triggering a vast increase in performance
overall. While it is acknowledged that there is still room-for-improvement within the logistical
network it is clear that RTBI has led to strengthened operations that involve international
networks at Guinness.
