Vikram Agarwal (COO of Danone): Plan, make, source and deliver

From source to sold: Stories of leadership in supply chain is a series of interviews with sector veterans where Radu Palamariu and Knut Alicke explore various industries, leadership styles and real-life experiences within the supply chain field. Each chapter is dedicated to a professional who has helped keep the world moving by driving new ideas, solving problems and fostering teamwork.

Vikram Agarwal’s first significant exposure to supply chain leadership came in 1997 when he was appointed as a factory manager to lead a multifunctional team. Considering that a factory is ground zero of the extended supply chain, and its health impacts that of the rest of the business, Agarwal contends that this early test helped him build the leadership acumen he possesses now.

“The next inflection point in my career came when I took up the role of the Vice President of Procurement for Asia-Africa at Unilever,” says Agarwal. “While I was used to dealing with people as a factory manager, in a controlled and structured environment, my position in procurement brought home the understanding of the external world.

One has to constantly find the win-win spot, which allows for strategic growth on both sides, fosters a long-term relationship and, at the same time, keeps us cost-competitive

“Procurement is about dealing with suppliers whose business interests, at least in theory, are in conflict with ours,” says Agarwal. “One has to constantly find the win-win spot, which allows for strategic growth on both sides, fosters a long-term relationship and, at the same time, keeps us cost-competitive. Walking this ledge successfully is a necessary skill that every supply chain leader needs to pick up.”

When Agarwal moved from Unilever to Avon as Chief Supply Chain Officer, he had to adapt to overseeing financial metrics differently in a company one-tenth the size of his former employer. “At Avon, cash had to be managed by every leader in the supply chain through working capital and CapEx, which needed attention on an ongoing basis.”

Keeping it simple to solve complicated problems

After decades of experience at the helm of the supply chain, Agarwal has distilled the nitty-gritty of doing business down to three simple things: revenue growth, profitability and cash. He says: “We need to constantly connect our actions with these business imperatives.”

Explaining the supply chain in business terms to peers in the organisation and on the board is critical, Agarwal stresses. “We often talk supply chain jargon and set KPIs without translating them into what they mean for the company,” he says. “I break operations down into four primary components: plan, make, source and deliver. Start with delivery to the consumer, plan the way back to ‘make’, and then source the materials flow.”

Supply chain resilience

When Vikram Agarwal joined Danone at the beginning of 2022, the company was already in the midst of fighting the pandemic’s after-effects on its supply chains. “My team has needed to push constantly for more resilience across our operations. Risk forecasting and resilience planning in the supply chain have become vital in the post-Covid era.”

Agarwal continues: “Building resilience by going deeper and broader into the supply chain base has become key to sustaining operations.” He asserts that companies should stop looking at supply chain operations as stand-alone entities and see them as a piece in the overall business puzzle.

Building resilience by going deeper and broader into the supply chain base has become key to sustaining operations

Firefighting operational issues has always been part of the job description of a supply chain leader. But for his part, Agarwal prefers to focus on out-of-the-box thinking during a crisis to create more business value. By way of example, Agarwal cites an anecdote from his time at Unilever. “When I was leading procurement for Asia and Africa, there was a movement by some NGOs against FMCG companies using palm oil in their products. This gained momentum with consumers in Europe, on the grounds that the palm oil industry was causing mass-scale deforestation and social exploitation, and started affecting revenues. We decided to investigate and found there was some circumstantial evidence of such instances with one of our major suppliers in South East Asia.”

This led the company to discontinue sourcing from that supplier, creating a cascade effect that destabilised the supply chain of one of the largest commodities in the world, palm oil. “We went out of stock. We had to patiently work through palm oil producer industry bodies, individual producers, NGOs, governments, media, new legislation and our FMCG counterparts to resolve the situation, without compromising our position on sustainability,” says Agarwal. “It took one year of intensive work to restore supply stability.”

However, this effort would eventually have a positive consequence. “Managing this crisis enabled me to have a closer look at the economics of the palm oil industry. I realised that, as a buyer, we would soon be squeezed by producers’ and refiners’ rising margins. On the other hand, pricing in our major markets was limited due to the anti-palm oil movement. We were headed for a margin squeeze.”

Out-of-the-box solutions

After much thought, Agarwal decided that it was time for Unilever to set up its own facility to go upstream right to the farm to ensure traceability of certified sustainable palm oil. It was a difficult proposal to obtain agreement upon internally since the company had veered away from investments in non-core products.

“We did receive permission, but it came with stiff conditions on achieving sustainable sourcing and receiving incentives from the Indonesian government. It took us three years to negotiate these incentives, set up the inbound supplies and build a large oleochemicals complex,” says Agarwal. “Finally, we got there. And over the last five years, this facility has created huge value for the company.”

Another incident at Unilever where Agarwal’s forward-thinking decisions made a significant difference was when he found himself in the middle of a tea plantation sale in East Africa. “The decision to dispose of the plantation had already been made due to financial unviability and intense pressure from some European NGOs,” he says.

But when Agarwal visited the site, he realised it was actually a well-established operation spread over thousands of hectares where close to 10,000 people worked. “The reasons for poor financial performance lay in inefficiencies that could be corrected. I figured the environmental impact could be turned positive with a few interventions. The alternative was to close operations, which would see people lose their livelihoods.” Furthermore, the plant contained an ancient forest reserve with a very delicate ecosystem. “We were not only caring for it but also protecting it from illegal poachers and loggers. Us leaving would have turned the entire area into a wasteland.

“It was a long story thereafter: first about internal persuasion against selling, then developing a recovery plan, getting some of the world’s best experts into the middle of nowhere, and, finally, an economic turnaround. Today, these plantations are a valuable asset, not just for the owners but also for the countries involved.”

A no-nonsense approach to leadership

When it comes to recruitment, Agarwal declares that he would always pick a person with the hunger to “fill the glass” rather than accept it half full. “I look for people who have a can-do attitude without being reckless because when working in the supply chain, it’s easy to say no. ‘Can the factory increase its production in the next month?’ ‘Can you launch this new product in six months’ time?’ ‘Can you supply this unplanned customer order in two days?’ The usual answer to all these questions is no, so I often flip the question and ask them what it would take for them to say yes.

I look for people who have a can-do attitude without being reckless because when working in the supply chain, it’s easy to say no

“For me, it’s important that the person I’m working with is capable of going from ‘it can’t be done’ to ‘what does it take to get it done?’ In the supply chain, there is always a solution, a workaround, to reach an acceptable outcome.”

Leadership potential is the next attribute on the list of what Agarwal looks for when hiring. In the FMCG industry, typically 25% to 30% of the workforce would be in the supply chain, which makes it crucial to have leaders who can communicate clearly to their people and lead large teams with a common strategy. “Employees seek for you to be inspirational and caring, not just in speech but in all your actions. A supply chain director is as visible as a goldfish in a bowl because they have more encounters with people on the ground. Great PowerPoint presentations are not assets for these people: they need to sense your personal direction and authenticity.”

Agarwal also advises that “a role in the supply chain requires you to participate in almost every business discussion, so you need to develop the business acumen to engage in these constructively. Although some may seem removed from operations, like a discussion on future market share trends, it actually would have a bearing on your capacity planning.”

The trick to being a good supply chain professional is to connect the business aspect with the physical product flow. “Nobody will instruct you to establish a new factory or distribution centre or enhance supplier capacity. You will have to develop the capability to understand short- and long-term demand sensing,” says Agarwal.