When the Supply Chain Begins with the Customer

Walt George helps American-Italian Pasta Co. move a billion pounds of pasta through its supply chain every year. Here's how.

[From iSource Business, August/September 2003] Americans consumed about 4 billion pounds of pasta in 2002, and just one company produced about a quarter of that total. American-Italian Pasta Co. (AIPC), based in Kansas City, Mo., had sales of $381 million in 2002, and yet the company employs just 630 people and operates five production facilities, including four in the United States (in Excelsior Springs, Mo.; Columbia, S.C.; Kenosha, Wisc.; and Tolleson, Ariz.) and one abroad (Verolanuova, Italy).

One billion pounds of pasta, placed end-to-end in 16-ounce packages of spaghetti, would stretch around the Earth's Equator nearly nine times, so you can imagine the supply chain necessary to get all the ingredients into the plants and all the packaged goods onto store shelves in an orderly — and moreover, low-cost — fashion. The responsibility for running AIPC's supply chain falls to Walter N. George, executive vice president of operations and supply chain at the company.

Prior to joining AIPC in January 2001, George completed a 12-year career as vice president of supply chain for Colgate-Palmolive's pet food subsidiary, Hill's Pet Nutrition, where he was a member of the parent company's global logistics council. George began his career with Frito-Lay, and his experience ranges from plant management, inventory planning and management, sales and operations to customer service, logistics and strategic planning.

George recently spoke with iSource Business about AIPC's supply chain, the importance of technology to driving efficiencies in that supply chain, and how his function contributes to the company's overall competitiveness. But first we asked George to talk about his role at AIPC.

George: My role in the organization is to provide strategic oversight and direction for the supply chain that begins with our flour milling operation and extends literally all the way to our customers' shelves. We have a fully integrated supply chain and manufacturing organization. A lot of companies break those things apart: What they call "supply chain" begins at the manufacturing dock and is really more logistics. That's not the case here. We are fully integrated, and supply chain includes customer service, the strategic planning group, forecasting and demand planning. We also have an extensive supply chain modeling capability that we developed when I joined the company.

iSource: What are you typically sourcing?

George: Obviously, our biggest material sourcing is durum wheat, and that plays a key role in a lot of our supply chain planning. The greatest source of wheat for us comes out of the Dakotas — out of North Dakota primarily — and also out of the desert in Arizona. Historically, we've sourced a lot of wheat out of Canada — Saskatchewan, Manitoba, really up in the North American wheat belt.

We bring that wheat in by train to our facilities in Excelsior Springs, Mo., and Columbia, S.C., where we actually employ our own milling operations. We're the only vertically integrated pasta producer in North America to that degree — we mill all our own durum on both those sites.

iSource: What are the principal supply chain challenges you are facing today, and what processes and technologies are you implementing to meet those challenges?

George: The place to start is to talk about the supply chain philosophically. The approach that I've developed through my career is a little bit of a twist from what I think most supply chain managers would use. I would say that the supply chain begins with the customer and flows backwards, as opposed to the more conventional point of view that says the supply chain begins with the source of your materials and flows forward. Therefore, by design, we have created a supply chain that satisfies and adapts to our customers' needs, and by definition our supply chain has to be extremely flexible. So, how we employ technology and how we operate our supply chain really is driven by customer requirements.

The challenge that any consumer products retailer or food retailer faces today is managing the customers' desire to drive cost out of their supply chains and a general unwillingness to offset the costs that may drive into the suppliers' supply chain. So our challenge is to anticipate what those supply chain drivers will be for our customers and be prepared for them, or actually to bring our customers' ideas on how they can make their supply chains more efficient.