Ferrero: Managing A Global Supply Chain in the Social Media Era

LAESmith    February 22, 2016

Okay a show of hands… who doesn’t like chocolate? Anybody??? Didn’t think so. Perhaps one of the most loved foods in the world, chocolate comes in so many forms it’s virtually impossible to find someone that doesn’t like chocolate in at least one form. I don’t actually have any data to back that up, just my own theory that you’d have an easier time finding a unicorn or a Sasquatch. Perhaps I’m letting my own love of chocolate cloud my judgment but I can’t be that far off considering that the average Canadian consumes 5.5 kilograms or roughly 12 pounds of chocolate each year.

Ferrero SpA is the fourth largest manufacturer of chocolate and confectionery products in the world, behind only Mars, Mondelēz International (makers of Cadbury, Oreo and many other brands) and Nestlé. The Italian manufacturer is probably most recognized as the makers of the famous Ferrero Rocher chocolates but are also responsible for bringing us Tic Tac, Kinder and Nutella. Ferrero is responsible for using about one quarter of the world’s hazelnut supply and have almost single-highhandedly caused the hazelnut industry to soar.

The truth is, if you’re like me you’ve probably never given much thought to how your favourite chocolate treat gets to you but as I’ve found out it can be quite a complicated process. In fact Ferrero refers to their Nutella supply chain as its “Global Value Chain” because it truly is a global endeavor.

Collaboration on a Global Scale

With suppliers, factories, and sales offices located across 6 continents and end users in approximately 100 countries, it’s not hard to see how important collaboration is to such a complex supply chain. Ensuring effective communication between distributors, suppliers and retailers is especially important when dealing with food products that have an expiry date. Having operations spread out around the globe means Ferrero needs to be able to communicate logistical updates and share data and knowledge around the clock. Social networking allows them to stay in touch and increase collaboration among their partners throughout the supply chains of each of their products. In the following video Jeff Ashcroft, a logistics professional with more than twenty years experience in retailing, distribution, systems, third party logistics and supply chain management discusses how social media “creates a rich communication environment that helps to facilitate the collaboration process”.

Real-time Forecasting to Meet Demand

Monitoring social media is also vital to predicting demand and ensuring adequate supply of products. Take Nutella for example: in 2007 blogger Sara Rosso came up with the idea of declaring February 5th World Nutella Day as a way of encouraging other Nutella enthusiasts to share their love of Nutella and post recipes on Twitter, Facebook and utilizing the hashtag #worldnutelladay. Considering that restaurants, bakeries and thousands of bloggers participate in the event annually, anticipating a surge in sales is vital to ensuring adequate inventory at the retail level.

It can, however, work the other way too and production may need to be slowed if anticipating a downturn in demand. In 2013, Ferrero issued a cease and desist letter to Rosso demanding that she stop using the name and logo on her social media accounts, essentially putting an end to World Nutella Day. This seemed like a pretty drastic move considering the amount of interest the past events had spurred. The social media reaction was swift and of course negative with some people even calling for a boycott of the popular spread.

Less than a week later Ferrero reached an agreement with Rosso and dropped the cease and desist order and World Nutella Day was saved but not without incurring some social media damage to the company’s reputation.

Social Media’s Influence on CSR in the Supply Chain

Another major impact that social media has had on Ferrero’s supply chain relates to the company’s corporate social responsibility. Gone are the days when companies can fill their products with unhealthy, unethical or environmentally damaging ingredients and expect it to go unnoticed. In recent years many chocolate manufacturers have come under fire on social media for using cocoa sourced from suppliers that use child and forced-adult labour. In 2012 Ferrero pledged to eradicate slavery from its supplier’s farms by the year 2020 – they were the third major chocolate manufacturer to make a commitment to fair trade cocoa.

In addition to cocoa, a major ingredient Ferrero uses in manufacturing Nutella is palm oil. Palm oil has become a major target for social media environmental activists as its use in commercial food manufacturing has increased in recent years leading to widespread clearing of Indonesian forests to make room for additional crops. This has resulted in the loss of habitat for already critically endangered orangutans, tigers and many other species. Ferrero has been very proactive in cleaning up its supply chain and actually leads the industry in using sustainable palm oils reaching its goal of 100% sustainability a year earlier than planned. Despite their efforts Ferrero is still often associated with the negative effects of palm oil on social media.

Lessons for Others

Social media is here and from the looks of things it is not going away anytime soon. Many companies have figured out how to use social media in marketing and customer relations but the number of companies using it for supply chain management is still relatively low. Whether you are a small business peddling your wares on Etsy or the fourth largest chocolate manufacturer in the world every product has its own supply chain challenges. Collaboration and communication among the involved parties can mean the difference between big profits and big problems and the infrastructure needed to facilitate it is already at your fingertips with platforms like Twitter, LinkedIn and Facebook.

Organization: Ferrero SpA
Industry: Food Processing - Chocolate and Confections
Name of Organization Contact: Anna Petrova, Associate Director, Supply Chain, Ferrero Canada

Authored by: LAESmith

If you have concerns as to the accuracy of anything posted on this site, please send your concerns to Peter Carr, Program Director, Social Media for Business Performance.


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