Food & Beverage | The Digital Supply Chain Rules Behind Mizone

Danone's Beverage Business in China has deepened its presence in the market for over two decades, committed to consistently delivering high-quality and trustworthy products to consumers. Danone China Mizone focuses on the Pulpy vitamin drink brand. Over the past nearly two decades, Pulpy has been a pioneer and leader in the vitamin drink segment, dedicated to providing healthy, delicious, and nutritious hydration beverages. With its rich vitamin content and low sugar formula, Pulpy promotes a vibrant and positive lifestyle for Chinese consumers, helping them maintain good physical and mental well-being anytime, anywhere.

Currently, the consumer market is undergoing a crucial transformation characterized by the shift from offline shopping behaviors to the integration of complex and diversified consumption scenarios under a multi-channel background. The food and beverage sector stands out as one of the most typical industries undergoing this transformation.

In managing the collision of new and old channels and navigating the transformation to an omni-channel environment, how do upstream and downstream processes collaborate? How can new technologies be seamlessly integrated into existing organizational structures to better support business development?

To address these questions, Rogo Net interviewed Mr. Lu Hanbin, Vice President of Supply Chain at Danone China beverages.

Industry Leader in Business and Technological Transformation

As a prominent multinational food and beverage company, Danone operates in three key areas: specialized nutrition, dairy and plant-based products, and water and beverages. These areas cover the entire lifecycle of consumers from birth to old age. Danone's corporate mission is "bringing health through food to as many people as possible," guided by the action framework of "One Planet. One Health," promoting healthier and more sustainable dietary behaviors while making a tangible impact on nutrition, health, society, and the environment. Danone's well-known brands such as Aptamil, Nutricia, Pulpy, Nu Nutricia, Nancare, Nutriplenish, and Evian are highly favored by Chinese consumers and are leaders in their respective categories.

Danone's beverage business in China has been deeply rooted in the market for over twenty years, dedicated to continuously bringing consumers high-quality and trusted products. The main product under Danone China Beverages is Pulpy vitamin drinks. Over the past two decades, Pulpy has pioneered and led the vitamin drink market, committed to providing healthy, delicious, and nutritious hydration beverages. With its rich vitamin content and low sugar formula, Pulpy promotes a more energetic and positive lifestyle for a wide range of Chinese consumers, helping them maintain good physical and mental well-being.

Danone China Beverages takes corporate social responsibility seriously, having been certified as a "China Outstanding Employer" for six consecutive years and achieving B Corp certification in 2021, becoming the largest "benefit corporation" in the beverage industry in Greater China.

Lu Hanbin explained to Rogo Net that after years of transformation and development, Danone China Beverages has established distribution models tailored to the economic development characteristics of different regions. The distribution channels mainly consist of offline supermarkets, convenience stores, and other retail outlets, complemented by various online channels to reach more consumers in different purchasing scenarios. In addition to relying on "business partners" nationwide to connect directly with consumer terminals and achieve win-win business models, Danone has also expanded into online platforms such as B2B, B2C, and O2O community group buying, as well as distribution channels in numerous scenic spots and outdoor sports venues. These channels bring Danone's beverage sales closer to consumers and better meet the strong demand for scenario-based consumption.

At the end of 2018, Danone China Beverages established the "Digital Transformation" steering committee, where senior management led various departments in formulating the company's digital transformation strategy. Unlike many companies that deploy application systems to solve functional departmental pain points and develop system functions as a starting point, Danone China Beverages chose to rethink its digital capabilities from a holistic perspective of the company's operations and the entire consumer-to-supplier supply chain.

Flexibility in logistics order fulfillment services is required to meet the multi-channel, multi-product distribution and fulfillment requirements across the country. The diversification of channel scenarios and product distribution strategies imposes higher efficiency requirements on inventory allocation. The urgent need to establish multi-channel supply chain capabilities and share inventory across channels calls for further upgrading of the existing online order management system. For example, product distribution strategies based on rule configuration automatically manage inventory allocation, changing the previous manual dependency on inventory allocation management to automatic order and warehouse allocation; reorganizing the entire order process across systems; strengthening supply chain and logistics planning and execution levels, achieving new channel strategies and integrating business and financial aspects, and so on.

"The rapid development and changes in our business have compelled us to build an efficient, agile, and lean supply chain, with digital supply chain being a crucial lever. These factors prompted us to decide to upgrade and create a more comprehensive multi-channel inventory order fulfillment management platform."

Lu Hanbin emphasized, "Danone China Beverages' accelerated digital transformation focuses on three aspects: firstly, empowering the organization to support new business scenarios and capability requirements, enabling sustainable business growth through digitalization of processes for efficiency, flexibility, and compliance; secondly, enhancing efficiency and transparency of collaboration between upstream and downstream partners, integrating data across the entire chain to drive decision optimization, reduce costs, improve service, and efficiency; thirdly, an agile supply chain driven by demand, flexibly configuring various resources, and rapidly and accurately responding to demand across the entire chain."

Building a Digital Supply Chain Platform

"This system requires reshaping business and technical boundaries between it and ERP, reestablishing data interfaces and business processes among our internal existing multiple business systems. After lengthy consideration, we found that there was no ready-made solution. Even similar systems in the same industry cannot be directly replicated. This is determined by each enterprise's own business model," Lu Hanbin said. "Ultimately, we chose TTX as the partner for this order platform upgrade project, leveraging its OMS system as a mid-end order management platform that has been piloted and fully launched in November 2022."

Through further in-depth interviews, it was learned that this system integrates Danone's existing systems, including ERP, WMS, TMS, client-side marketing tools, and order systems, solving the problem of collaborative operations among various departments within the system.

At the same time, around the country's large sales organizational structure, it solves the integrated product distribution, inventory, quota, credit system, and financial accounting management under the national multi-channel distribution system, truly empowering business partners to focus on the business itself.

Danone also affirmed the overall value and results of the project: firstly, it managed all-channel orders and inventory through a mid-end "one-inventory" management, enabling Danone to more accurately predict future order fulfillment levels, adjust supply and warehouse strategies more timely, and meet customer fulfillment needs more quickly; secondly, through order control management and inventory allocation, Danone achieved finer management and maximized automation, such as enhancing the freshness and turnover rate of channel inventory and improving warehousing and transportation efficiency, further optimizing logistics costs through existing path optimization systems; thirdly, the new system enhanced upstream and downstream collaborative efficiency, involving sales, channel distribution, supply chain planning, logistics allocation, customer service, and financial accounting core business links; empowering sales personnel and customers to place orders with one click and confirm orders in real time, improving fulfillment efficiency.

Lu Hanbin added, "Currently, our order platform system is not just a tool for managing order processes but has integrated Danone's internal systems into a platform that looks towards the future with a business-coordinated business perspective, thereby enhancing the digital operational capabilities of the supply chain as a whole. Our partners have also done a commendable job from a technical perspective to achieve this mission."

Conclusion

The current trend towards diversified channels is a common challenge facing the FMCG industry, requiring more efficient channel management and distribution strategies. Lu Hanbin also believes that for industries like beverages in the FMCG sector, distribution channels will become more diversified and scenario-based, requiring continuous enhancement of distribution depth and breadth, along with increasingly complex service networks.

To address this, Danone is focusing on two fronts: creating distribution channels closer to consumer scenarios to support business development and, from the perspective of lean logistics and supply chain management, using digital capabilities to create a more agile, efficient, and automated management. For example, in the project to build a digital mid-end order platform, Danone's goal is not only to solve current business demand issues but also to leverage the platform's rapid iteration to support the transformation of new channels and routes in the future, helping the company maintain the competitiveness of its supply chain.

Through this integrated supply chain platform construction, Danone's digital capabilities have taken a lead in the industry, ensuring unified data and business logic from headquarters to every business unit nationwide, coordinating all-channel order fulfillment capabilities. However, how to interface with partners' systems, achieve true end-to-end transparency, and manage customer orders actively are areas Danone is currently actively exploring.

The global supply chain is entering a new phase of development, characterized by further digital transformation. To support the transformation of deeply distributed channels and business development, brands like Danone are leveraging digital supply chain transformation through professional software companies, aiming ultimately at pursuing supply chain efficiency, which will become their core competitiveness, supporting long-term business success.