of the three segments. The company considers manufacturing in Asia to be critical to its ability to provide Asian
markets with consistent customer service and prevent
supply disruptions. “It allows us to keep product closer to
the market to reduce leadtime,” Rice explains. Moreover,
local manufacturing is what makes it possible for Diageo to
execute a differentiated supply chain, she adds.
At present, Diageo operates 13 manufacturing facilities, either wholly owned,
joint ventures, or third-party operations,
in the Asia-Pacific region. Diageo’s wholly
owned facilities, located in Bundaberg,
Queensland, and Huntingwood, New
South Wales, Australia, and Incheon,
South Korea, produce a wide range of
products for the Asian market. Diageo
also has joint-venture and third-party bottling facilities in China, Vietnam,
Singapore, Hong Kong, Indonesia, Japan,
and Malaysia that produce spirits and beer, including some
that are specific to local markets.
A key element of Diageo’s Asian risk management strategy was the opening of a product-finishing and distribution
center in Singapore in 2006. The center, which has the
capacity to handle 8 million cases of liquor annually, allows
Diageo to efficiently handle imported beverages. Imported
product—for example, Scotch whisky, which can only be
labeled as such if it’s made in Scotland—is transported in
bulk, in cases, and in kegs. It is held in the Singapore facility
until there is a specific demand for it. The DC then applies
the appropriate labels and tax stamps for the individual
national markets and ships the order.
Because it can tailor products to local markets and ship
them in response to changes in demand, the Singapore
center supports Diageo’s responsive and agile supply chain
strategies. “It allows us to mitigate demand volatility,” Rice
says. But there have been other benefits, too. “Since its
launch, we have improved customer service,” she says. “The
decision to finish some of our products in Singapore, rath-
er than Scotland or elsewhere, has reduced leadtime from
eight to 10 weeks down to one to three weeks.”
In 2011, Diageo constructed a “super-premium” finish-
ing center in Singapore, located adjacent to the first facility.
The new center further supports the company’s agile sup-
ply chain strategy by developing time-sensitive products
for special occasions. For example, it creates special liquor
packages for the Chinese New Year and Vietnam’s “Tet”
New Year celebrations. The center can even produce pack-
ages with special engravings on them. Performing these
tasks in a purpose-built facility has undeniable benefits.
“Our super-premium finishing center allows for limit-
ed-edition small-batch orders to be quickly assembled at
short notice without compromising cost efficiencies and
disrupting the supply chain operations for the rest of our
portfolio,” Rice explains.
A COMPETITIVE ADVANTAGE
While Diageo’s approach has been very effective in mitigat-
ing supply chain risk in Asia, it has also helped Diageo man-
age its costs and forward planning. For example, because the
Singapore center allows Diageo to reduce long leadtimes for
imported product, the company has been able to cut back
on its inventory in Asia and still respond quickly to local
demand. “By establishing a distribution
and finishing center and a super-premium
center in Singapore, we’re able to keep our
products closer to markets in the region,”
Rice says. “Markets now have the option of
placing orders with a shorter leadtime and
improved forecast accuracy.”
Diageo’s differentiated product strate-
gy results in a competitive advantage in
Asia, Rice says, because it gives the global
manufacturer the ability to sell a range of
products that meet different consumer
demands, and thus capture a greater share of Asia-Pacific’s
various markets. Diageo’s differentiated supply chain design
and infrastructure, matched to specific product marketing
strategies, makes all that possible. Says Rice: “Establishing
differentiated capabilities in our supply chain allows us to
support this strategy with speed and agility.” N
