How Johnson & Johnson overhauled its baby care supply chain
How Johnson & Johnson overhauled its baby care supply chain
Global consolidation meant ensuring consistent formulations, fewer ingredients and fewer suppliers.
Sept. 25, 2018
Johnson & Johnson’s grip on the baby care product market began 124 years ago, when it introduced its baby powder line.
Since then, they continued adding products, lining the shelves with a multitude of pastel-hued bottles with colorful contents. Over time, they would make bottles and formulations slightly differently in each region. A process, which, sources say, make it less efficient to procure the right ingredients at the best prices, and to introduce new products or promotions.
The brand would continue to succeed for decades. In 1953, J&J popularized “no more tears” as a motto for its new shampoo, lexicon which would last through at least 2014. But five years ago, something changed.
“No more tears” may have been a catchy phrase, but it started ringing less true when reports surfaced that certain ingredients — dyes, sulfates, parabens and formaldehyde-releasing preservatives — were potentially harmful.
The company began to walk a tightrope: insisting the formula was safe, but removing controversial ingredients nonetheless. To remove some of them, however, the company had to overhaul its formulations — a process that would take years.
Revenue, meanwhile, continued to fall.
So, three years ago, J&J began a journey that included 26,000 customer interviews as it sought guidance over which ingredients and packaging choices consumers preferred. In doing so, J&J also took a hard look at their total supply chain and manufacturing process.
The process began with a vision, led by Jorge Mesquita and Robert Wuesthoff, chairman executive vice president and vice president of supply chain for J&J’s worldwide consumer segments, respectively. It was then passed on to a cross-functional team appointed to the project, which was “fully empowered to drive the re-design of the Value Chain from the bottom up with a direct line of communication to the Sponsors (Wuesthoff and Mesquita),” according to a J&J spokesperson.
“Since the early stage of the internal discussions, it was clear that the feedback received from Consumers required an holistic approach and it could not be achieved by looking in isolation at few elements of the Value Chain,” the spokesperson wrote in an email to Supply Chain Dive. Rather, an end-to-end “approach from Supply Chain to Shelf transformation was the way to go.”
- Q1 2015Decision to change the formulations and standardize all chassis.
- Q2 2016Decision to transform the supply chain, from end-to-end.
See the full timeline
Standardizing the product and packaging
One of the biggest changes J&J made was globalizing their formulations and packaging.
Formulations and packaging were slightly different, as vendors and packaging decisions were made regionally. Over the years, they’ve made minor tweaks in individual markets, like changing suppliers. But they were losing efficiencies as a global company due to the fragmentation.
“For many years we have allowed the products to develop on their own merit and regional marketing,” said Francesco Pannone, J&J’s global consumer supply chain value stream lead, who orchestrated the transformation. The regional approach was not sustainable. They realized that their supply chain was not as nimble and agile as it could be, and they weren’t leveraging their global scale in sourcing.
“We had a high degree of fragmentation in the supply chain with respect to the number of suppliers and materials,” said Harjinder Singh, global head of packaging procurement at Johnson & Johnson. The bottles looked similar but had slightly different weights. As part of the supply chain overhaul, J&J harmonized their specifications globally, so now they are technically identical.
They consolidated suppliers not only to standardize the products, but to take advantage of their volume. “In the raw materials or package materials space, scale is very important to suppliers,” said Singh. “We were diluting that with different specifications across the globe, and not fully leveraging the power of J&J’s buying abilities.”
Consolidating suppliers and manufacturing plants
They decreased the number of chemical ingredient suppliers by 33%, going from 74 to 53 suppliers, while decreasing the number of “inkies” — cosmetic ingredients — used in the formulation, from 17 to five.
Within each category, like shampoo, body wash or lotion, the chassis, or base formulation for the product type, is the same. Previously the chassis and overall formulations had regional differences. Prior to the supply chain overhaul, J&J used 49 chassis globally, and now they have 15 across all baby product lines.
By standardizing the chassis and formulations, they can more easily source the ingredients globally, optimizing their manufacturing equipment cleaning process, and introducing better mixing technology. Instead of working in smaller batches, the mixing technology gives them more flexibility with batch size and scale, said Pannone. The formulation and chassis changes decreased the amount of water they need for cleaning by 20%.
By the numbers
- 3-year process
- 26,000 customer interviews
The ingredients and packaging
- 71% fewer cosmetic ingredients / “inkies”
- 69% fewer chassis formulations
- 50% more pumps
- 82% fewer packaging molds
- 13 manufacturing plants (from 27)
- 6 packaging suppliers (from 50)
- 53 chemical ingredient suppliers (from 74)
- 20% less water needed for cleaning
They made changes to the manufacturing line to improve efficiencies and accommodate the new bottle shapes and packaging features.
As an example, they increased the number of pumps used in their products by 50%. They also reduced the number of production plants. Previously, they used 27 manufacturing plants, with different degrees of volume, and now they are running 13 plants in four regions: North America, Latin America, Asia and EMEA (Europe, Middle East and Africa).
Suppliers were an integral part in developing the new formulations. “We relied on their expertise,” said Singh. “Fewer suppliers means tighter relationships with them,” and each side has a lot invested in ensuring success.
Packaging consolidation was significant as well. They moved from 50 packaging suppliers to six. Before the changes, their suppliers may have had global capacity, but they were only leveraging them regionally.
In spite of sourcing consolidation, J&J retained their regional sourcing employees, as execution is local, said Singh. Bottles, for example, are made close to the manufacturing site. “We need a presence on-site, managing relationships,” he said.
J&J does not make its own packaging materials, and previously, regional packaging varied slightly from plant to plant. In some cases, like buying caps or closures, J&J orders from two or three large global facilities and ships the materials around the world. “Caps travel easily,” said Singh. “Shipping air is expensive.” For that reason, they use bottle suppliers close to the formulation production sites.
They decreased the number of molds used to make their packaging materials from 700 to 125. That involved getting their caps, pumps, bottles and closures suppliers into joint design and development sessions. “Normally they’re competitors with each other,” he said, but J&J needed solutions that worked as an integrated system.
The process has taken about three years, and the new products started filling shelves in the United States and Canada this summer. They’ll roll out to China, India and the rest of the world in early 2019.
“It took significant orchestration to be able to deliver all of this effort,” Pannone said.
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