Troy Hicks, Senior Vice President of Global Supply Chain at Herbalife Nutrition, is in charge of product supply for his company’s ninety-plus markets. When the coronavirus pandemic first hit in 2020, his immediate reaction was to pump the brakes in global supply. Why? Because Herbalife was on a growth trajectory and had a lot of inventory coming in, most of it perishable.
As Hicks feared, the pandemic impacted business. “We slid through March, our numbers started getting soft, and we actually started declining up through the midpoint of April,” Hicks says. “Then something amazing happened.”
What happened was a phenomenon Hicks calls “the distributor difference.” Sales suddenly started taking off, and Herbalife went from pumping the brakes to pumping the gas in global supply.
“It had everything to do with our distributors seizing the moment of surging nutrition during a pandemic, on top of intersecting into a very disrupted retail channel,” he explains. “People weren't going out to shop. They were stuck at home buying goods online. They were actually buying more goods because they weren't spending on services such as travel or going out to restaurants.”
Hicks was amazed by Herbalife’s distributors being able to—in less than a month—translate their businesses from a high-touch sales environments to virtual environments and replicating it around the world. He points out that the company had its highest company sales in a period of peak global disruption.
“And we supplied it, not because I had some amazing plan for a pandemic or knew how to navigate this,” he admits. “Some of it was pure luck. We had a lot of supply, and that bought us the time we needed to respond to the changes in the marketplace.”
3 Winning Strategies
Hicks says that Herbalife was not perfect in its supply chain strategy during the pandemic. It spent a lot of money and, admittedly, made some mistakes. But throughout this last year, executives were able to see the areas of the business in which they were strong and those in which they were weak. And when they boiled it all down, three key strategies for moving forward and beating future supply chain challenges emerged.
Transparency. This is the most foundational takeaway when it comes to a competitive advantage with supply chain moving forward, says Hicks. “Transparency is really just understanding your sources of supply so that when change and risk occur, you can react faster,” he says. “And in the nutrition industry, consumers want to know more about what they're buying, who they're buying it from, and how product is made. As do governments and regulators.”
Hicks explains that good transparency is about having good visibility and data-sharing capability with all the participants that help to bring your product to market. The areas where Herbalife had good transparency outperformed those areas in which it did not. Hicks says some of the biggest blind spots—which ended up as the biggest supply disruptions—included transportation, packaging, and minor ingredients supply.
While Hicks notes that transparency is not easily built, he says Herbalife is finding that track and trace technologies are affordable and make it easier than ever to implement processes like serialization and to leverage things like blockchain to bring transparency to third-party suppliers and raw material ingredients supply.
And this track of transparency is allowing something else to emerge: the visual journey of products. Hicks says the company is working on taking that story and creating value to the marketplace to tell the story of its product to the end-consumer, which helps distributor sell the products.
“For example, the QR code on a restaurant menu today can show an Herbalife product, where our ingredients come from, and the rigor we put it through,” says Hicks. “You could even put in the factory it was made in or, with the technology and capability we now have, show the actual tea leaves from the actual harvest lot that goes into that jar.”
The hard part is scaling the technology for ninety countries, with different languages and the governance that goes around that content. But Hicks and Herbalife executives believe this is the way they can really personalize their products to create a competitive advantage for distributors in the marketplace and differentiate the company from those that do not have that same story to tell.
Product Continuity. Last year was a good reminder that direct selling companies need better protection and resiliency in supply chain. Hicks says that Herbalife executives recognized that the company’s backup plans were only as good as the date they were written on.
“Most of our backup plans were really about dollars spent than actual risk,” Hicks says. “One of our biggest challenges was with minor ingredients, which go into everything. They had the ability to bring entire product categories down.”
But in considering continuity, Hicks says it's unrealistic to have a Plan B for every supply scenario. It deleverages, he believes, more important strategies like cost, scale, and quality. So Herbalife has boiled their continuity plan down to two things that will help build resiliency in protection: profiling the supply chain to better identify risk and become more agile with implementing change.
Profiling supply chain is simply putting definition to your supply chain so you can see where your risks exist. For instance, are you dual sourced or single sourced? How many ingredients go into a product? How many products require common or unique ingredients? This profiling, Hicks says, allowed Herbalife to funnel its resources to focus on what mattered most, helping to build better protection and responsiveness in its supply chain.
As for change agility, that is simply the ability to make changes faster. Hicks said last year his team was constantly having to make changes with suppliers and ingredient sources just to stay in stock. They ultimately found that the administration of making a change, at times, took longer than the actual change needed. So the team is now spending time in this area trying to cut out the red tape and make the process faster.
“We think that continuity is not about having a backup plan for everything,” says Hicks. “It's really about understanding where your risks are so you can respond to them faster, being able to focus your resources on what matters, and then being flexible in making changes faster.”
Building to Last. Once you have better transparency, a foundation to build on, and better continuity to protect your supply chain with better resiliency, Hicks says it's all about how you build your supply chain to make it last. For Herbalife, the answer was in building more sustainability in its supply chain, manufacturing, and the products themselves.
“We are a business built on relationship and trust,” Hicks says. “We need to give our distributors a better story to tell, and we really think sustainability is a key for the future.”
Research shows that today’s consumers will typically choose to buy products from companies that are more sustainable and doing business in ethical ways. Additionally, the investor community is looking beyond financials; Hicks says they're actually looking at formal environmental, social, and corporate governance (ESG) programs that show progress towards sustainability.
“At Herbalife, we're really focused on what we call ‘finding the mutual benefit’,” says Hicks. “Some examples of this are we were able to eliminate over 1,600 metric tons of plastic. We eliminated all single-use plastics in our entire operation over the last two years to reduce freight waste and have figured out how to better predict our product waste before it expires so we can deploy that product to local charities around the world to help feed the hungry.”
As he looks forward, Hicks sees supply chain remaining a “global traffic jam” that will likely stay that way for at least another year. But he also sees a shift in consumerism. People are buying direct more than ever. Backed-up shipping ports are evidence of that. And with people buying more direct, that is equating to smaller, more frequent shipments, more local distribution, and more home delivery. To Hicks, it is going to take time for infrastructure to catch up.
“This is really a moment of opportunity for direct sellers to really seize the shift, leverage their supply chain, and help create a competitive advantage for their direct sellers in this dynamic marketplace,” he says.