phoenix_wdi_2014summer-1.compressed

M
NON-DURABLE
HERBALIFE
www.her b alife.com / Net s ales $4.8 : billion / Hea dq ua r ter s : Los Angeles / Emplo y ees : 7,000 / S pecia l ty: Nutrition products
/ R ich Goud is , CO O “We : never cross the goal line, we just continue to move the ball down the field.”
Herbalife is one of the w orld’ s leading direct sales
comp anies, and continues to grow .
A H e a l t hy F ut ur e
Herbalife’ s ‘ seed-to-feed’ supply chain strategy is at the center of the direct
marketing giant’ s efforts to double its siz e by 2 0 2 0 . BY J IM HARRIS
i l l i o n s o f p e o p l e h a Instead v e of just staying the course and
maintaining its business at its current
levels, Herbalife continues to grow and
expand not only in terms of its global
footprint, but also its internal operations.
“We have a philosophy that we
looked to Herbalife to help
them live healthier and more
active lives for more than 3 0 years. With
3 million-plus independent members
and distributors of its food, nutrition
and personal care products in more than
9 0 countries and many more millions of
daily consumers, the L os Angeles-based
company has grown to become one of
the world’s leading direct sales companies
since founder Mark Hughes sold his
first protein shake in 1 9 8 0.
can always build it better,” COO R ich
Goudis says. “We never cross the goal
line, we just continue to move the ball
down the field.”
Ongoing technology, manufacturing
and supply chain investments are helping
Herbalife meet its goal of doubling
in size by 2020, which the company refers
to as its “decade plan.”
‘ SEED TO F EED ’
One key component of Herbalife’s
growth strategy is its “seed-to-feed” initiative,
which addresses the traceability
of it ingredients, and the manufacturing
and quality of its products. “We believe
that as we grow over the next 1 0 years,
food safety will be a important strategic
initiative in order to create confidence
among our members and their consum-
40 www.wdimagazine.com Summer 2014

HERBALIFE
ers,” Goudis says. “We want complete
traceability of our products throughout
the entire supply chain.”
To achieve this, the company recently
made two significant facility investments.
A botanical extraction facility
in Changsha, Hunan Province, China,
processes botanical extracts such as
teas, guarana, chamomile, broccoli and
bilberry for use in many of the company’s
products. These extracts are
produced from botanicals purchased
directly from known farms in Hunan
Province and other regions in China,
processed in Changsha and then sent to
Herbalife’s manufacturing facilities in
S uzhou, China, and L ake F orest, Calif.,
as well as its contract manufacturers.
Changsha, the capital of Hunan Province,
is home to many of the world’s nutritional
herbs and botanicals. Herbalife
Herbalife recently invested in a botanical ex traction facility
in C hina to p rocess ex tracts for multip le p roducts.
also protects their ingredient pipeline
by sourcing key materials from world
leading suppliers such as vitamins and
minerals from D S M ( formerly R oche V i-
tamins) , soy from D uPont and AD M and
fructose from Tate & L yle and D uPont,
among other sources, the company says.
The 1 6 5 ,000-square-foot, $1 1 million
facility, which opened in early 201 3 ,
can process roughly 2,000 metric tons
of raw materials annually through extraction,
purification and drying methods.
The facility also houses Herbalife’s
quality control center of excellence,
which routinely retests all products
manufactured worldwide.
The new $1 3 0 million Herbalife Innovation
and Manufacturing ( HIM)
facility in Winston-S alem, N.C., which
opened in May, will also enhance the
company’s ability to make quality products
and, with added capacity, meet the
growing needs of the company. The
5 8 0,000-square-foot plant – the largest
facility directly operated by Herbalife
– will house manufacturing operations
as well as product development and
quality laboratories.
The facility will create an estimated
5 00 jobs in manufacturing, packaging,
warehousing, engineering, quality
control and other areas. Products
manufactured in the Winston-S alem
plant will be exported into more than
5 0 countries, to many of the company’s
more than 7 00 member access points
worldwide, the company notes.
The new facilities will be linked to
Herbalife’s other factories and distribution
centers around the world through
the Oracle information systems platform.
The North American market is
served by hub distribution centers in
Memphis and L os Angeles and 1 0 other
smaller regional sales centers.
“Any factory we directly operate runs
Oracle’s manufacturing module as its
core operating system,” Goudis says,
noting that all the company’s manufacturing
data is backed up in a cloud infrastructure
housed in Austin, Texas. “E very
factory runs the same metrics and analytics,
which we can monitor centrally,
and all products are planned using Oracle’s
Advanced S upply Planning mod-
Summer 2014 www.wdimagazine.com 41

Q
HERBALIFE
Herbalife says its use of an Oracle management
system gives it a high degree of control.
ule.” In addition, the company uses Oracle’s Agile PL M system
as its repository and “one source of truth” for product formulations,
specifications and labels Oracle’s warehouse management
system to run their largest regional distribution centers.
“Oracle helps us run a global company with even greater
ease and most importantly, gives us the level of control over
our proprietary data that we require,” Goudis adds.
Herbalife’s other technology partners include IPTI, which
provides its pick to light hardware; Interroll, which provides
pallet flow racking; and TWG, which provides the conveyor
systems used in the company’s warehouses and factories.
“ W e want comp l et e
t r aceab il it y of ou r
p r odu ct s .”
– Rich Goudis
UA LITY CONTR OLS
The seed-to-feed program establishes a number of quality
controls that Herbalife applies to its manufacturing, warehousing
and distribution practices.
Incoming materials are tested for identity, the presence of
heavy metals, microbiology and pesticides. In addition, the
42 www.wdimagazine.com Summer 2014

HERBALIFE
identity of key herbal ingredients is
verified through the company’s botanical
identification program, which established
a “fingerprint” for botanical
ingredients that all incoming materials
are compared against. “When we specify
a botanical ingredient, we want to
make sure we are getting the right kind
of botanical every time,” Goudis notes.
Products go through at least five
rounds of testing during the procurement
to production process. That includes
testing the products extensively
to ensure they meet what is claimed
on their labeling.
In addition to testing, Herbalife
assures quality by maintaining appropriate
climates for its products to
avoid spoilage. The temperature and
humidity can be tracked electronically
as they move through the shipping
process. “As our products journey
through the logistics and warehousing
environment, they’re all kept under
strict temperature monitoring and
humidity controls,” Goudis says, noting
that products are shipped to countries
in five distinct climate zones.
“We want to understand the environment
our products will be in, so we can
understand the nature of, and make
changes to avoid any member or consumer
complaints we might receive.”
// CRB USA // CRB teamed with Herbalife to provide Design/Build services for their multi-product
nutritional supplement production facility located in Winston-Salem, North Carolina. Working with the
Herbalife Team, CRB was responsible for overall project management, facility architecture, process
utilities, mechanical, electrical, plumbing/fire protection, I&C design and construction management
services. This Design/Build project went from concept to commissioning in 18 months.
by its members, that can vary in size
and scope from commercial spaces to
homes. Instead of investing in weeks’
worth of products, customers pay a
few dollars a day to enter the club and
enjoy a single shake, tea and aloe. The
JOIN THE CLUB
Herbalife’s $200 million investment
in its single-instance Oracle platform
also provides the company with the
capacity to open up to five or six new
markets a year. Much of the company’s
growth in recent years does not come
from new markets, but instead is a
result of a transformation in its sales
model from having customers periodically
buying large quantities of Herbalife
products to a daily consumption
model, where consumers essentially
purchase by the serving, Goudis says.
In this model, customers typically
visit “Nutrition Clubs” established
Summer 2014 www.wdimagazine.com 43

T
F
HERBALIFE
the marketplace, and also have a robust
scientific advisory team that includes
some of the leaders and influencers in
areas such as obesity, heart health and
nutritional supplements,” Goudis says.
“We react to this input while sticking to
our core product category offerings.”
lower price point opens up a larger market
of people who can afford to buy our
products, he adds.
The daily consumption model started
more than 1 0 years ago in Mexico,
which is now the second largest country
in Herbalife’s portfolio.
In addition to shaping the company’s
he comp any tests all incoming materials to ensure
they are the right botanicals for the p roducts.
business model, consumers and members
also play a role in helping the company
develop new products and fl avors.
The majority of the company’s research
and development efforts take place
close to local markets.
“We get a lot of input from our members
on what they would like to see in
LEA D ING CHA NG E
Herbalife’s growth and traceability
strategies are driven by a management
team that was hired specifically
with the D ecade Plan in mind. “F or us,
growth is not just a matter of finding a
warehouse or acquiring a company, it’s
about investing in a management team
to execute a core strategy that will create
a competitive advantage for years to
come,” Goudis says.
Goudis joined Herbalife in 2004 , initially
as the company’s CF O. In 201 0
he became COO, and today, Herbalife
employs 1 8 executives from Goudis’
past two companies – R exall S undown
and GNC. This group of industry leading
executives includes executive vice
president D avid Pezzullo, senior vice
presidents Gerry Holly, Mark E vans
and Gary S wanson and vice presidents
Mike L ocke, J im B arton, Q un Y i Z heng
and K uei Tu Chang. L eading executives
who joined the team from other industry-leading
companies include senior
vice presidents J oseph Plunkett, B ill
rankos and Pradip Mukerji.
Herbalife’s management and other
personnel all excel at handling the
complexity of a global business’ manufacturing
and distribution operations
in an efficient manner, Goudis adds.
“We recently had an investor visit, and
he asked me what I thought our most
valuable assets are. I said, ` Our products
and distribution,’ but what creates real
value here is our culture,” Goudis says.
“When you visit one of our facilities,
you will find people who are passionate
about nutrition and want to help others,
and there’s a real sense here of embracing
and leading change.”
44 www.wdimagazine.com Summer 2014