Introduction: On 7 June, the Estée Lauder Companies (ELC) unveiled its new state-of-the-art distribution centre in Galgenen, Switzerland, one designed to accommodate the anticipated dynamic growth of its key global travel retail business.
The US beauty powerhouse reckons it reaches over three billion customers annually through the channel. Travel retail contributed 28% of ELC’s sales in fiscal 2021, compared with just 6% in 2004.
Galgenen will double output capacity while crucially offering the high flexibility necessary in a high-growth but volatile sector. On the eve of the opening Martin Moodie spoke to The Estée Lauder Companies Executive Vice President and Chief Supply Chain Officer Roberto Canevari, the man charged with leadership of the company’s all-important supply network.
“This opening that we are celebrating has a big, big meaning, both for the travel retail business overall but also from a global supply chain standpoint,” says Canevari.
“For travel retail this is essentially doubling our capacity of global fulfilment, which means we have a lot of confidence in travel retail’s potential commercial growth. And we need to stay ahead of the growth. The role of a good supply chain is to always be just a little bit ahead of the requirements so that when those requirements materialise, we’re ready to fulfil.”
In terms of capacity, he says, Galgenen is the right strategic investment based on the group’s projections for travel retail. But it’s not just about capacity, Canevari adds. Galgenen’s advanced technology allows maximum flexibility and modularity in following demand, which in a world of volatility and uncertainty is “super important”, he says.
Canevari talks proudly of the centre’s “state-of-the-art” technology. This translates into operational excellence, quality, speed to market – all critical attributes of a modern supply chain, he says.
“On top of being phenomenally important for the fulfilment of travel retail, which is one of our biggest and most important channels… the technology that we use here is a great learning opportunity for our supply chain overall,” Canevari comments.
Business at any time, but particularly during crisis is about controlling the controllables. The past three years have been deeply impacted by a (thankfully) rare combination of a global pandemic, war in Ukraine, Brexit, worldwide inflation and related supply chain issues – a potpourri of challenges. Against such a backdrop, it must be devilishly difficult to manage the supply ecosytem, I suggest.
“It is. We definitely don’t get bored!” Canevari replies. “This period has really been full of challenges and you mentioned some of them. You are right, Galgenen is a good example of focusing on controlling the controllables. That’s exactly what we’re trying to do because there is so much happening around us. One of the biggest mistakes that somebody could do now is to focus on everything that is happening and try to control what is not controllable… this will be a waste.
“I sincerely believe that this is a great learning experience. And it’s certainly an opportunity to become a lot stronger and better as a team to say, ‘Ok, let’s use this opportunity to focus on what is really controllable and make it phenomenal.” That way, the group will be a lot stronger both during stormy periods as well as in the calmer days that hopefully lay ahead, he adds.
“We will manage and navigate through this challenging moment better than others. At the end of the day, we’re competing. So it’s about doing it in a more competitive way. And that’s really what we’re doing. I’m proud of that. The reason why I think Estée Lauder is doing it pretty well is twofold. It’s something that started before the challenges because it would have been impossible to react the way we are reacting if these would not have been values that the company had built over the years.
“To me, there are two values. One is seeing the supply chain as a network – as an ecosystem. And the value is not just seeing it, but making sure that we have built a real partnership with the network, with the companies in the ecosystem. These real partnerships are allowing us to react better and faster, because there are strong relationships and strong understanding.”
The second factor, he says, is the human aspect. “I think one of the big advantages of this company is the culture. So the people have great capabilities and great skills, but what makes the difference even more is the energy, the passion, the commitment, that you see every day in the cohesion of the teams.
“So I’m really focusing personally a lot on the network as a concept, the partnerships as a value, and the people and the teams, because the biggest competitive advantage is the team dynamics.”
Media coverage of the beauty sector tends to focus on the glamorous aspects of the business, product launches, store activations, marketing and so on. But without a smooth-running engine room in terms of supply chain everything else can break down, I suggest.
“I love the job that I’m doing. I am really passionate about supply chain, because it’s exactly what you’re saying, it is the engine behind [the scenes],” Canevari responds. “And it is the engine that is touching everything… and the reason I like it is that it has to be synchronised.
“It’s easy to say, but to do it goes back to seeing the network really end to end. I use the word network a lot more than chain or supply chain, because chain to me is not the right word. A chain is sequential. And what we do is anything but sequential.
[Click on the icon to view a short film about the Galgenen distribution centre]
“So I like a lot more the supply network as a concept. Because then it becomes the idea of how you manage and synchronise a complex ecosystem. At Galgenen there is a lot of technology but supply chain is essentially about people.
Canevari says that several key factors contribute to the success of a supply network. “At the end of the day performance has to be there,” he comments. Performance measured by several benchmarks: On-time management of supply; service levels; the ability to manage costs and cash; ensuring capacity and quality; and above all the ability to do all this while respecting the company’s foundational values of safety, quality and sustainability.
Asked what makes him tick professionally, Canevari talks passionately about his love for the job. There are two other critical Ps besides performance, he says – people and planet. The Estée Lauder Companies has just become a founding member of Zero100, an organisation that applies technology to reinvent the production, distribution and consumption of physical goods for customers and the planet: a Zero Percent Carbon, 100% digital supply chain.
“Zero100 stands for zero impact and 100% digital, so [it is about] how you leverage technology to ensure that actually your impact goes to zero or you become a positive net impact. That’s a passion for me and that is the beauty of how the supply chain can really contribute to this journey.”
As our interview draws to a close, Canevari underlines the scale of his role and exactly why he enjoys it so much. “We have over 20 prestige brands, we are selling in more than 150 countries, we have four big categories, several subcategories and several thousands of SKUS. We have very different channels growing with different dynamics at different speeds and with different requirements. It is a complex machine. That’s why the synchronisation of all these complex machines is phenomenal and a fun job.”