Irish Distillers procurement team plans for Brexit as company maintains strength growth
Irish Distillers is gearing up to continue double digit market growth up to 2030 while its procurement function is taking steps to address the more immediate threat of Brexit to its operations, as Colman Garrihy reports.
Irish Distillers has grown its output of flagship whiskey brand, Jameson from 3 million cases 10 years ago to 7.3 million cases in the current fiscal year. As the company plans to continue its growth over the next decade, ensuring it has the correct supplier strategy in place to achieve that expansion is seen as vital.
Given that a significant proportion of its dry goods’ supplies originate in, or transit through, the UK, the current uncertainty regarding Brexit is obviously of major concern to Irish Distillers. Addressing this immediate challenge is, therefore, a top priority for Procurement Manager Seamus Keyes and his team.
“We are well prepared for Brexit and have a contingency plan ready to go,” stressed Seamus.
“We have been working on this for the past 15-18 months to ensure that the company and our suppliers are aligned to cope with Brexit. We have examined the potential impact on our current supply base, and what we need to do to ensure contingency supplies in that area.”
In practical terms, Seamus said, this includes ensuring that any safety stock being stored in the UK has been transferred to Ireland. Another step being taken is to ensure the company has alternative supply capacity in a European plant, where possible.
“An example would be working with one of our label suppliers, Eurostampa based in Scotland, to ensure they have contingency arrangements in place to produce supplies in their sister plant in Italy,” Mr Keyes added.
Irish Distillers is also exploring with European suppliers the possibility of opening up alternative shipping routes from the Continent to Ireland, such as Santander in Spain to Cork.
Other steps being taken as part of a comprehensive Brexit contingency plan include increasing the general levels of safety stock.
“We are very confident of our plans and contingency arrangements for Brexit, based on our early intervention in proactively addressing this issue. We have also noticed an increased awareness of Brexit and the requirements to have safety stock and alternative shipping routes in place amongst UK companies in the past 5-6 months,” said Mr Keyes.
Wide-ranging supply needs
Aside from Brexit, Seamus Keyes and his seven-strong procurement team are engaged in strategic moves to ensure the company has the right mix and quality of suppliers to meet the needs of the dynamically expanding company in the years ahead.
Further investment of more than €150 million in Irish Distillers’ Midleton Distillery, maturation site in Dungourney, Co. Cork, and Fox and Geese bottling plant in Dublin over the next two years is one indication of the ambitious growth plans of the company. This overall growth calls for increased demands for dry goods, the sourcing of which is the particular responsibility of Keyes’ team.
Among the main raw materials required are glass, labels, shippers, corks, caps and dividers. Other needs range from cardboard SBCs (single box cartons) for gift packs to wooden boxes for premium products.
Indirect spend on POS (Point of Sale) materials is also important, including Jameson branded glasses, bar runners, bar trays and even Jameson clothing items.
“Across all these categories, we aim to have the right mix of suppliers and to communicate effectively and share relevant information with them. This partnership approach facilitates the necessary investment to meet our demands as we continue to grow,” said Mr Keyes.
Glass is one of the company’s biggest spends. It needs to have sufficient capacity from suppliers while quality is maintained as demand increases.
Sustainability is a keen priority for the company and its Jameson brand; Irish Distillers was one of the first companies to ban plastic straws within its POS range.
“We plan to migrate that kind of sustainability approach into our wider range. This involves things like looking at what kind of ink we use; the level of recyclable glass we use in our bottles and, in terms of shippers, to ensure that all our board comes from sustainable forests and our suppliers are aware of that as a key pillar,” the Procurement Manager emphasised.
He said that Pernod Ricard is very ambitious in seeking out sustainable alternative options to non-recyclable inputs and have significant plans in this regard up to 2030. Irish Distillers wants to be very active in this drive and is already taking practical steps, such as replacing moulded plastic trays with a recyclable pulp for inserts in our VAPs – Value Added Packs.
Another dimension to the drive for sustainability is the Value Engineering work carried out by the team.
This involves working with suppliers to reduce production costs without compromising on quality.
Examples include reducing the size of the back labels on Jameson bottles by 27% to eliminate space where there are no words or visuals, and reducing the height of the dividers within shippers without affecting the quality of the goods. In relation to transportation, it means exploring with suppliers how to achieve a lower carbon footprint and improved efficiency by raising the shipping levels from four- to five-tier high, again without affecting quality.
Six key pillars
In its strategic procurement approach, Irish Distillers focuses on six key pillars or principles. These are: work with the right suppliers; support local supply where feasible; measure performance; manage risk; implement ethical CSR (corporate social responsibility) policies and build strong internal relationships with suppliers.
For sourcing purposes, Irish Distillers largely operates as an independent affiliate within the parent Pernod Ricard group but, for certain items, it amalgamates purchases with other group plants. One example of the latter is where it has group contracts in place for glass with colleagues from Chivas Brothers in Scotland and the Absolut Company in Sweden.
“We have a central procurement hub in Paris and work with them to identify what volumes merit negotiating group contracts, with the remainder being more suited to local sourcing,” said Seamus Keyes.
While supplies are globally sourced due to their nature, the company, and the Jameson brand, are very proud of their Irish heritage and provenance.
Although local suppliers may not always be able to meet the demands of its global brand reach, the company is keen to work with Irish suppliers where possible.
Examples of local sourcing include the supply of almost all corrugated shippers by Smurfit Kappa and bottles from Encirc in Fermanagh (formerly part of the Quinn Group) as one of three major vendors for that sector.
In the case of labels, two of the three major suppliers have branches in Ireland – MCC in Drogheda and CCL in Blanchardstown, Dublin.
A major supplier of gift packaging services is Lucas Luxury Packaging, an Irish-owned company based in Co. Wicklow which carries out a great deal of the creative and design work involved, with raw materials being sourced in China.
Quality, service, innovation, CSR and costs are the main KPIs taken into account when measuring the performance of suppliers.
Managing risk is a priority, not just in the context of Brexit. “We want to ensure we have dual supply arrangements in place once we reach a certain volume threshold. We must also have contingency plans within any sole supply situation. For example, a label manufacturer operating in Ireland needs to have an alternative label manufacturing capability in a sister plant in Europe in the event of any problems with supply in Ireland,” explained Seamus Keyes.
Supply sources are far-flung – for instance, Italy for design elements and as a traditional manufacturing base for things like labels and wooden boxes; China for a lot of POS items.
The Procurement Team is structured to meet its varying needs and involves personnel assigned to specific areas of expertise.
Category Managers head up purchasing operations and strategy for glass; labels, shippers and caps; gift packaging; international POS development and domestic POS purchasing.
A Performance Co-ordinator measures supplier performance in addition to overseeing value engineering initiatives mentioned previously. An administrator completes the team line-up.
Co-operation and close linkage with other departments is a key feature of the team’s work. This includes the New Packaging Development Team and Marketing (in sourcing supplies for new product, for instance), Logistics (e.g. ensuring supplies are ready to allow finished goods ship to market) and Quality (in dealing with any supplier issues that arise in that regard).
Open to new suppliers – but high standards involved
Seamus Keyes has worked for Irish Distillers for 18 years and assumed the role of Procurement Manager two years ago. His positive final word to potential suppliers is that, while the company has many long-term supplier relationships, it is always open to potential new suppliers.
“We are always open to doing business with new vendors. However, we do have high standards that must be adhered to and potential suppliers must meet those in order to be considered,” he concluded.
|Key Facts – Irish Distillers
· Irish Distillers was formed in 1966 – a merger between John Power & Son, John Jameson & Son and Cork Distilleries Company.
· Employs over 600 people in Cork and Dublin
· Its brands are exported to 130+ markets
· In 1988, Irish Distillers joined Pernod Ricard Group, the world’s No. 2 in wines and spirits with consolidated sales of €8,987 million in FY18