Amway has very strong analytical capabilities that help
in making the best decisions about where and how to manufacture, Calvert says. “We have a very good international
trade group that not only looks at the impact of free trade
agreements but also helps us design our supply chain so we
take full advantage of the duty savings allowed under an
FTA,” he says. The engineering group, meanwhile, models
inventory and transportation costs for various shipping
lanes. Their analysis also compares manufacturing costs in
the locations under consideration, the availability of raw
materials, and the conversion costs for those materials,
among other factors. Labor costs, however, really aren’t a
large factor. “For our products, 80–85 percent of the cost is
in materials and components,” he explains.
THE INTANGIBLES
Amway’s decisions about what to manufacture and where
to do it also take into consideration some less tangible
factors, such as risk management and continuity planning.
An ever-present concern is the risk associated with out-
side suppliers—one more reason for owning the majority
of Amway’s manufacturing capacity. At the same time,
though, the company is careful to avoid overbuilding
capacity. “It’s a tough thing to have truly duplicate, redun-
dant production capability and still be economical,” Calvert
observes. “But we can make water- and air-treatment sys-
tems in two places, we can make nutrition tablets in three
or four places, and we can make beauty products in at least
three places, so we do have some ability to recover.”
When Amway does outsource manufacturing, it choos-
es suppliers that not only understand its quality-focused
culture but also will devote the necessary resources to
supporting it. That was not the case when the company
initially outsourced production of its food bars to a large
U.S. food manufacturer; Amway represented “a very small
part of their portfolio,” and it was difficult to get the level of
attention and support his company needed, Calvert recalls.
“Now we consider very carefully our scale to the scale of the
supplier. We don’t want to be 50 percent of that company’s
business, but we don’t want to be 1/5000th of it either.”
As is true for any global company with a diverse product
offering, many different factors influence the scope and
configuration of Amway’s manufacturing network. In the
end, though, what guides Amway’s global manufacturing
strategy is something that dates back to the company’s
origins nearly 60 years ago: a deep-rooted commitment to
product quality, from the ground up. c
TOBY GOOLEY IS EDITOR OF CSCMP’S SUPPLY CHAIN
QUARTERLY.
As his title suggests, George Calvert, Amway’s global chief supply
chain and R&D officer, has responsibility for quite different functions. At first glance, supply chain might not seem a good fit with
research and development (R&D). But Calvert says Amway’s business philosophy creates a logical bond between the two areas.
Calvert, who’s been with Amway for 27 years, did not set out
to become a supply chain executive. With a Ph.D. in chemistry,
he has spent most of his career in product research and development. He began at Amway conducting chemical analysis and
working in product development for nutritional supplements
like vitamins and minerals, and then gained experience in other
product lines, such as water- and air-treatment systems.
Later, Calvert worked in quality assurance—an eye-opening
shift from R&D, where successful completion of a project may
take years, to a “very operationally driven” function with dead-
lines measured in hours. He then headed R&D for 10 years, and
about six years ago was named Amway’s chief supply chain and
R&D officer. At that point Calvert took over responsibility for
supply chain, which he calls “one of those areas where good,
classical logic and paying attention to numbers and execution
make a difference. I hope to bring some of the critical thinking
you would expect from someone with a scientific degree to sup-
ply chain—an area that’s filled with talented, smart people with
a strong work ethic.”
In his current position, he’s deeply involved with teams that
are constantly seeking to identify ways that supply chain and
science can collaborate more closely. “R&D handoffs [to man-
ufacturing] are not a problem here,” he says. “We set annual
and long-range plans together, and we’re designing products for
different manufacturing sites. … The development of product
and processing takes place together.”
Today Calvert’s charge includes oversight of manufacturing,
distribution, logistics, international trade, procurement, plan-
ning, engineering, technology development, innovation, regu-
latory compliance, product development—in short, “anything
that has to do with plan, make, design, source, and deliver,”
he says. Despite that daunting list, Calvert says his job is “a lot
of fun. We have incredible talent, and the diverse nature of our
business means that I have one of the most interesting jobs in
this industry, period.”
THE RIGHT “CHEMISTRY” FOR THE JOB
