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Building the supply chain to enable business alignment: Lessons from British
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DOI: 10.1108/13598541011018085

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 Insight from industry

Building the supply chain to enable business

alignment: lessons from British American
Tobacco (BAT)
Janet Godsell
Centre for Logistics and Supply Chain Management, Cranfield School of Management, Cranfield, UK
Andy Birtwistle
British American Tobacco, London, UK, and
Remko van Hoek
Centre for Logistics and Supply Chain Management, Cranfield School of Management, Cranfield, UK

Abstract
Purpose – The purpose of this paper is to report on experiences from BAT’s major supply chain reconfiguration program; it details practices, lessons
learnt and do’s and do nots. There is little research that reports on how to manage major supply chain reconfiguration programs, despite the fact that it
is widely acknowledged that this can be challenging.
Design/methodology/approach – This paper reports insights from industry, directly captured from the responsible managers in workshops and
through co-author involvement.
Findings – Seven key lessons are shared, including how to use S&OP, measurement and other specific change management tactics and practices.
Practical implications – The findings reported in this paper are “straight from the horses mouth” and are very much informed by all the experience
developed inside BAT. Coupled with the focus on overall lessons, the findings will be useful for many other supply chain executives engaged in major
reconfigurations.
Originality/value – This paper provieds an insight into a major supply chain design project in BAT over a six year period. This included access to senior
decision makers and those actually running the change program. Case studies of this scale, scope and longitude are a rarity in supply chain strategy.

Keywords Supply chain management, Change management

Paper type Research paper

Introduction cascade of strategy typically assigns the sales growth targets to

In recent years supply chain management has moved up the
corporate agenda to be cited as a reason for corporate success
or failure. Poor availability of products that customers want,
and excessive stocks of those they do not – have plagued
many companies and created an organizational divide
between marketing and supply chain. Consequently, supply
chain management is now seen as a major competitive
weapon (Christopher, 1992; Fisher, 1997). But how do
companies ensure that they use such a weapon effectively?
The ultimate goal of a publicly listed company is to deliver a
sustainable return to its shareholders (Penrose, 1959). It does
so through its business strategy which is typically a mix of
sales growth and cost reduction targets. The traditional
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Supply Chain Management: An International Journal
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q Emerald Group Publishing Limited [ISSN 1359-8546]
[DOI 10.1108/13598541011018085]
the domain of marketing, and cost reduction targets to the
supply chain (Smith, 1956). Such approaches tend to lead to
the pursuit of marketing and supply chain targets in isolation
and the long term erosion of shareholder value (Christopher
and Ryals, 1999). As illustrated in Figure 1, business
alignment seeks to ensure congruence between the product,
marketing and supply chain strategy (Godsell, 2009).
Market opportunities are identified by understanding the
competitive environment and translating this into a customer
value proposition through the product and marketing strategy
(Levitt, 1960; Porter, 1985). Competitive advantage is then
achieved if the supply chain can develop a strategy to deliver
this value proposition at the lowest possible cost (Christopher,
1992). This could be considered as the “rough cut design”
which depicts the strategic framework and set of “guiding
principles” (Lapide, 2006) that provide the ground rules for
the detailed supply chain design.
Supply chain alignment is achieved when there is
congruence between the supply chain strategy, the
infrastructure (the physical supply chain and its assets) and
the operating model (the way the physical supply chain will be
managed) (Gattorna and Walters, 1996; Gattorna, 1998;

10
 Building the supply chain to enable business alignment
Janet Godsell, Andy Birtwistle and Remko van Hoek
Figure 1 Business alignment model
Godsell and Harrison, 2006; Sun and Hsu, 2009). This
essentially determines the “tailored practices” (Lapide, 2006;
Godsell, 2009) through which the supply chain strategy is
brought to life. It also helps to make the distinction between
the supply chain and supply chain management. The supply
chain being the infrastructure and supply chain management
the way the operating model is used to manage the supply
chain, in terms of processes, governance and decision rights,
organisational design and performance management. This is
an important distinction to make as strategic alignment affects
all elements of both the supply chain (McAdam and Brown,
2001) and its management.
Tamas (2000) found that there was a mismatch between
supply chain processes and corporate strategic goals, a finding
echoed by Van Hoek et al. (2009). Based upon an extensive
review of literature on business alignment Van Hoek et al.
identified a real need for furthering research in this area,
specifically looking at lessons learnt and practices that
improve business alignment. Furthermore, whilst it is widely
recognized that change management is key to the success of
any major supply chain reconfiguration (O’Laughlin et al.,
1993; Van Hoek et al., 1998), there is actually little guidance
on how to manage such a transition. This paper aims to help
close that gap. Based on their six year supply chain
reconfiguration journey British American Tobacco (BAT)
share seven key lessons learnt that provide food for thought
for other organisations embarking on such a journey. It is our
hope that this will help address not only the call for research
from Van Hoek et al. (2009) but also prove useful to supply
chain managers managing change in their own organization
and trying to align the business around their change program.
The next section will briefly introduce BAT. The following
section then shares lessons learnt. The paper concludes with
final observations and concluding remarks.
Introduction to British American Tobacco’s
European Supply Chain Reconfiguration
Programme
Background
British American Tobacco (BAT) is the world’s most
international tobacco group and has its group headquarters
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in the United Kingdom. With over 53,000 employees world
wide, BAT’s brands are sold in more than 180 markets from a
network of 47 cigarette factories. In 2007 BAT had a group
turnover of £26 bn and a profit (excluding profit from
exceptional items) of £3 bn. Table I summarizes BAT’s
reconfiguration programme and experiences which will be
further outlined in the remainder of this section.
Until 2002 BAT used a “federated” business model in
which the end market organisations were stand alone
businesses and the corporate centre was a holding company.
The corporate centre set challenging financial targets and
group standards (e.g. environment, health and safety, tax,
legal and governance). Simply speaking, if an end market
delivered its challenging financial targets in a responsible
manner then the centre was happy and the end market was
left to develop its own business.
In 2002 the central operations function undertook a review
of global operations the purpose of which was to quantify the
potential productivity benefits of leveraging their global scale.
This was reviewed by the management board and the CEO
communicated to the business in June 2003 the new global
vision for BAT. A central tenet of this vision was BAT’s ability
to leverage its global scale. A step on the journey to leveraging
global scale was firstly to leverage regional scale. Europe had
Table I BAT – case study dimensions
Company industry and country of
origin Tobacco, United Kingdom
Company dimensions (2007) Turnover: £26 bn
Profit: £3 bn
Markets where brands sold: 180 þ
Employees: 53,907
Reconfiguration/change effort The change from a federated
European organization to a single
above market organization
Scope of change in company European operations
Supply chain focus of change All core supply chain processes:
Plan, source, make and deliver
Time span of change 2002-2008 (and ongoing)
 Building the supply chain to enable business alignment
Janet Godsell, Andy Birtwistle and Remko van Hoek
particular opportunities as it had yet to take advantage of the
single trading block created by the expansion of the European
Union. Until this point Europe was a series of separate end
market commercial organisations with their own profit and
loss responsibilities. They could choose which products to sell
and which factories to source them from. The vision for
Europe was one of centralised regional co-ordination. This
was achieved through the creation of regional planning hubs:
Western Europe, Eastern Europe, Central Eastern Europe
and Other Tobacco Products (OTP)[1]. The change from a
federated European to one of centralised regional co-
ordination is the focus for this paper.
2003-2005
The first stage of the redesign process was to gain an
understanding of the current configuration and performance
of the supply chains in Europe. This included a review of all
key supply chain activities from the end market customer
through the internal supply chain (plan, source, make and
deliver) to first tier suppliers. In particular this focused on
gaining full visibility of both end market demand and
manufacturing capacity across the region. It was
complimented by a series of benchmarking activities that
compared the costs of the key supply chain processes (plan,
source, make and deliver) with other top quartile European
manufacturers. This enabled the factory footprint in Europe
to be reviewed, for production to be consolidated and the
number of factories reduced. Two other key initiatives that
took place in parallel were the creation of a regional logistics
capability and the introduction of “production wheels” to
simplify production planning to support the new
manufacturing footprint.
2005-2008
In 2005 a new Regional Operations Director for Europe was
appointed. In conjunction with the Regional Operations
Leadership Team Europe (ROLTE) they created a five year
vision and strategic framework – the “preferred future” – for
European operations as illustrated in Figure 2.
The intention was to create an integrated European
operation that was supported by three pillars:
1 fewer factories, at much lower cost;
2 managed in clusters with a strong customer focus; and
3 enabled by organisational and cultural change.
Ownership of the “preferred future” was achieved through the
creation and involvement of an Extended ROLTE Team
(EOLTE), a group of 70 key managers from across the supply
chain in Europe who were hand picked by the ROLTE. These
managers owned the “preferred future” and helped to cascade
the key messages to the operations community across the
region. The ongoing initiatives were consolidated and
expanded into a programme of projects specifically designed
to support the creation of the preferred future. Key projects
included the further rationalisation of the factory footprint,
product complexity reduction, and the introduction of a
common SAP platform across the region. Each initiative had
its own project board. Above this sat a portfolio board which
acted as a gatekeeper to ensure that projects were launched
only if they were appropriately resourced and governed
correctly. They also controlled the sequencing of the projects.
The portfolio board also initiated the creation of a
Transformation Board and Programme manager to ensure
consistency of approach across the region and avoid
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duplication and re-planning as certain projects (e.g. SAP)
were rolled out across the different clusters.
By 2008 the supply chain reconfiguration in Europe had
resulted in cost savings of e500 million across the region, an
increase in service levels[2] to the end market internal
customers and a significant reduction in working capital.
Lessons learnt
BAT has helped to define not only the key aspects of the
business alignment model, but also identified seven important
lessons for managers as they seek to reconfigure their supply
chain. Each of these key lessons will now be discussed in turn.
1 Build for business alignment from day one. Business
alignment needs to be embraced from the start of the
supply chain reconfiguration process. It has to be an
intrinsic part of the design, not an add-on for the simple
reason that there is not much that can be done in a supply
chain without business and peer function involvement.
The need to build for business alignment from day one
also means that the strategy of the business must be clear,
evaluated and agreed upon before the supply chain
response is developed. For BAT the supply chain strategy
for Europe was developed and aligned in response to the
BAT group strategy. As illustrated in Figure 2, the four
key pillars of the group strategy: growth, productivity,
responsibility were embedded in the preferred future for
European Operations.
2 Guiding principles are needed, not “copy paste” solutions.
Companies are unique, the context in which they operate
is unique and hence the supply chain solution they require
will also be unique (Lapide, 2006; Godsell and Harrison,
2006). Therefore, the combination of the business
strategy, the marketing and product strategies and the
resulting supply chain strategy will be unique model for a
company in its industry sector. As a result, do not use a
“copy paste” solution to reconfiguring a supply chain.
Either it will be too trivial to be helpful or too prescriptive
to be reflective of the unique circumstances of the supply
chain. Rather it is useful for a supply chain strategy to
identify “guiding principles” at a strategic level around
which the new operating model can be designed. Guiding
principles help direct reconfiguration focus without
implying standardization of process and model that
becomes a stalemate impossible for all business units to
use, thereby frustrating the change effort.
In BAT the guiding principles for the change from a
federated to regional business model were articulated by
the management board and CEO. Within Europe they
were developed by the Regional Director, and more
specifically by operations by the Regional Operations
Director and the ROLTE. The ROLTE then developed
the “preferred future” which set-out the guiding principles
for re-designing European Operations. This provided a
clear blue-print for the EOLTE to communicate these
principles to the wider operations community across the
region. Clear stakes were then placed in the ground
around which the European operations organisation could
be developed, and that ensured alignment with regional
and global business strategy.
3 A real need for simple rules. Management who have spent
many months carefully constructing a supply chain
strategy and operating model may have a clear
understanding of what it means, but this does not mean
 Building the supply chain to enable business alignment
Janet Godsell, Andy Birtwistle and Remko van Hoek
Figure 2 BAT European operations “preferred future”
that the rest of the workforce will have the same level of
understanding. A critical enabler of change is to ensure
that the rules and language used when communicating the
supply chain strategy and operating model, are kept
simple and have a common understanding across the
business. Rules also need to be enforced. Those who
follow the rules need to be overtly rewarded and those
who fail to “punished”.
This approach is firstly aimed at communicating what
the new desired behaviours and ways of working are, but
also it is a way of mobilising the organisation and almost
making the organisation self policing. It is a very good way
of cascading the message quickly and effectively as well as
empowering the layers of management to change the way
the business operates. Additionally, it must also be easy
for supply chain partners to do business with the company
– both customers and suppliers of products and services.
These partners also need to understand how the
organisation wishes to operate in the future and what it
now expects from its supply chain partners.
A good example of the use of simple rules within
European BAT operations was the introduction of the
planning rule “what we sold last week, we produce this
week”. This was a simple concept that was understood by
all across the supply chain regardless of their function and
level of seniority.
4 No sacred cows allowed. We all have our own deeply held
belief systems, which shape our perspective of reality. It
takes on average five years to change our belief system and
hence our underlying values (Schein, 1992). There are
some beliefs that we hold so deeply that we find it very
difficult to change or understand a different perspective If
pre-conceived ideas about the supply chain strategy and/
or operating model exist, left unresolved these could act as
an inhibitor to change. Given that it is imperative to
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“manage change by fact” to ensure that the emotion is
taken out of the decision and deeply held beliefs or
“sacred cows” can be challenged in a positive and non-
threatening way.
Many “sacred cows” within the organisation may need
to be challenged for effective supply chain reconfiguration
and change management. The change agents within the
organisation can use the new key guiding principles and
simple rules to challenge ways of working that do not
comply with the new vision. They need to make sure they
are only challenging these things because of alignment
issues and not change for change sake. This will be a
mechanism for taking the emotion out of the discussions,
and gradually change the way the organisation views these
various ways of working. And if consensus cannot be
reached then the issue needs to be escalated through the
governance structure and a top down decision must be
made. Any wavering of senior management away from the
agreed upon new model and supply chain vision will
threaten the change programme with failure. The top
down messages and behaviours must be unequivocally
aligned to the new strategy.
BAT had a flagship factory in Southampton. This was
the only remaining factory in the UK. Given the history of
BAT and the fact that it had its headquarters in the UK it
was a strongly held belief or “sacred cow” that BAT must
maintain a manufacturing presence in the UK even
though their manufacturing unit costs were high and the
majority of the customers they served based in the middle
east. The announcement of the closure of the
Southampton factory in June 2005 challenged this belief
and sent a strong signal across the organisation that
European Operations would “manage by fact” and take
decisions that were in the best commercial interests of the
business.
 Building the supply chain to enable business alignment
Janet Godsell, Andy Birtwistle and Remko van Hoek
5 Unfreeze-freeze-unfreeze. Crucial to success in building a
new supply chain strategy is gaining the right balance
between the time to be innovative and creative, the time to
collect new ideas and gain consensus and the time to
execute and deliver. This is essentially an unfreeze-freeze-
unfreeze cycle. In the early stages of supply chain redesign
it may be necessary to “unfreeze” and actively seek the
opinions of key stakeholders in the process. There then
comes a time, as the design becomes finalised, when it
needs to be “frozen”. Once the design is embedded it can
then be constructively reviewed in the second “unfreeze”
phase and improvements can be made. This clarity is
crucial to ensure that the implementation does not
become paralysed by incremental improvements. It also
needs to be supported by the right leadership style for the
situation – situational leadership (Hersey et al., 2008).
Additionally, the phases of freeze and unfreeze need to
be coherent and aligned across the business. The
governance of the reconfiguration programme needs to
be clear, with a top team aligning the portfolio of projects
and programmes across the business. This was the
approach adopted by BAT European Operations where
the portfolio board acted as gate keepers to ensure that
projects were only launched if they were appropriately
resourced and governed correctly.
6 Use S&OP to drive decision making on shorter time horizon.
The Sales and Operations planning (S&OP) is the single
most important process to enable a business to optimise
its profitability. It is at the heart of the planning hierarchy
and a key enabler of business alignment. It exists in many
organisations but its full potential is often not realised.
The first five learning points above have focused on the
definition of an aligned strategy, how to get the business
aligned towards that strategy, how to communicate the
new vision and how to start living and managing the
change. The S&OP process is part of the operational and
line management processes. It is through this process that
the operational alignment to strategy can be managed and
implemented. The S&OP process normally manages the 1
to 2 year forward horizon. These decision making
meetings must, therefore, ensure that these shorter term
decisions and proposed changes to the business embrace
the new strategy and the new operating model, and that
the new desired behaviours are re-enforced.
In Europe BAT used the S&OP meeting and as a forum
was managing the introduction of new products across the
region which enabled the delivery of a key part of the BAT
growth strategy – faster introduction of new innovation.
The S&OP forum was also used to help manage the
implementation of a product complexity reduction
project.
7 Be careful how you measure things, you get what you measure.
The key purpose of the S&OP meeting is decision making
and management of the performance of the business. To
this end businesses create key performance indicators
(KPIs) and dashboards. Unfortunately KPIs tend to be
focused on the performance of just one part of the
business and therefore do not necessarily support the
vision of alignment. For instance, in BAT the OTIF (on
time in full) measure for end market service level was
measured based on a standard lead time from the moment
the order was accepted onto the planning system. In order
to ensure that the OTIF target was met customer orders
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Supply Chain Management: An International Journal
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would not be accepted until it was guaranteed that there
was the manufacturing capacity and materials availability
to ensure that the target would be met. In addition, orders
would not be despatched to end market customers, even if
they were desperate for the product unless a full container
load of product could be despatched. This was because a
key measure for the logistics function was load
efficiency[3].
Observations and concluding thoughts
The BAT supply chain reconfiguration program has lasted six
years at this point in time and it has been a major
undertaking. This is not uncommon given the size and scale
of modern supply chains and the breadth and depth of
business alignment needed for successful change. It should be
noted that specific keys to success are in the change
management itself. There is real importance and art to
getting business alignment and change management right.
BAT has changed direction of its efforts while underway and
it has learned many lessons as it went along. Because of the
stakes, the amount of effort and time required in major supply
chain reconfiguration programs, the lessons shared here are so
valuable and unique. In particular, they can help other
companies improve effectiveness or accelerate the pace of
change in their supply chain reconfiguration programs.
Companies have the opportunity to use their supply chain
as a competitive weapon if they choose to build the supply
chain to enable business alignment. In essence this means that
a business needs to ensure not only that it has a clearly
articulated business strategy, but that its supply chain strategy
is aligned to this, whilst explicitly recognising the customers
and consumers to which it responds. Building a supply chain
to enable business alignment and ensure that your business
continues to deliver shareholder value.
Notes
1 Other Tobacco Products (OTP): all tobacco products sold
by BAT that are not cigarettes (e.g. cigars).
2 Measured as On Time In Full delivery – OTIF. This was
calculated based on a standard lead time for each end
market customer that started from the day the end market
customer order was accepted.
3 Load efficiency is a measure of container utilisation i.e.
the percentage of the available container space that is filled
with product.
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About the authors
Janet Godsell joined the Cranfield faculty in 2001, having
completed her Executive MBA there. Prior to this she was at
Dyson Ltd where she undertook a number of operational and
process improvement roles in functions spanning the breadth
of the supply chain, including R&D, customer logistics,
purchasing and manufacturing. Janet’s origins are in
engineering and she spent her early career working for ICI
and Zeneca Pharmaceuticals. She is a chartered mechanical
engineer and a member of the Institution of Mechanical
Engineers. She also speaks Japanese having studied and
worked in Japan. She is currently developing a virtual Centre
of Excellence in Supply Chain Management with Kobe
University, School of Business Administration. Janet’s main
research and teaching interests are in exploiting the links
between marketing and supply chain strategy, to develop
market-led or customer responsive supply chains. She is the
corresponding author and can be contacted at:
janet.godsell@cranfield.ac.uk
Andy Birtwistle is an internal supply chain strategy
consultant for British American Tobacco (BAT), where he
has be involved in the re-engineering of the BAT supply chain
at both a regional and group level. Prior to this he was a
supply chain consultant for Accenture.
Remko van Hoek is Chief Procurement Officer at Nuon in
the Netherlands and visiting professor of supply chain
management at the Cranfield School of Management in the
UK. He serves on the Board of Directors of the Council for
Supply Chain Management Professionals and on several
editorial boards.