Supply Chain for Amway Essay

Meeting global responsibilities by caring for communities 01_Introduction Successful businesses do more than simply provide goods and services for customers. They also make a real contribution to the communities in which they operate. Successful ethical enterprises: • create employment and job security • provide products that give consumers good value for money • contribute to creating a more caring and cared for community and hence a better world. Amway provides a good example of a business that recognises its wider responsibilities. It is one of the world’s largest direct sales companies.

Amway works with around 3 million Independent Business Owners (IBOs) in more than 80 countries. These IBOs are the link between Amway and the final consumer. They are also Amway’s links with citizens and communities across the globe. In the UK Amway distributes a variety of products, including: Personal Care Skin Care & Colour Cosmetics Durables Nutrition and Wellness Catalogue Items Home Care Fragrances, body care and hair care products A range of skincare and colour cosmetics Cookware and water treatment systems Food supplements, food and drinks Third party electrical goods Laundry, cleaning, and car care products

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As well as its business aims the company has a range of social aims that are part of a ‘Global Cause Program’. These are outlined below. The world’s most respected companies recognise that being a good corporate citizen means supporting causes that matter to the communities in which they operate. This is why Amway Europe has created links with the United Nations Children’s Fund (UNICEF). UNICEF is a global champion for children’s rights. It seeks to make a lasting difference and improve children’s lives.

The United Nations Convention on the Rights of the Child sets out the right of all children to reach their full potential. It is the foundation of UNICEF’s work. Working with UNICEF, Amway has launched an exciting pan-European fundraising campaign for children. It recognises the importance of building good working relationships with UNICEF’s National Committees in each market in order to rollout fundraising programmes to Amway’s IBOs and their customers. • efficient distribution: ensuring products reach IBOs on time and in top condition • product promotion and IBO support e. g. upplying brochures to IBOs. Getting the image right is vital in a business that relies on building relationships with individuals and the wider community. IBOs often sell directly to friends and it is essential to provide high quality, value for money products with a 100% satisfaction guarantee. Amway spends time, money and effort on creating an appropriate design and appearance for Amway products. It also develops campaigns that support the business and social aims of the company. 02_Direct selling and supply chain A supply chain contains a set of links that bring finished products to end consumers.

As a direct selling company, selling consumable products directly to consumers and bypassing the traditional ‘retail’ or ‘high street’. Amway has its own distinct chain, placing. a strong emphasis on IBOs who are able to focus on individual customers and their needs. Amway manufactures the majority of its own brand products at their manufacturing plant in Ada, Michican. It then distributes these directly to the IBOs through a centralised warehouse in Venlo, Netherlands. Having signed a contract to work within Amway’s Rules of Conduct and Code of Ethics, IBOs are trusted to operate flexibly within a ‘self regulatory’ environment.

They develop direct supply channels and sell products to friends and customers that they know or meet. Amway’s Supply Chain Raw materials Amway manufacturing and distribution Amway (Lead organisation. Head Office in USA) Regional affiliate organisations e. g. Amway (UK and Ireland) IBOs End consumers 03_Growth Growth is a major driving force for global businesses. It has to be. Standing still is not a viable option in a world in which competitors are growing by building new links in new countries and markets. Growth brings advantages nown as economies of scale. These advantages include being able to spread advertising and marketing costs over much greater volumes of output. This results in lower unit costs and more competitive prices. IBOs End consumers Amway’s supply chain is different from a more conventional supply chain that normally sells goods to final consumers through retail outlets. Amway’s way of working depends on building lasting connections with the end consumer. Feedback provided by consumers and IBOs helps to shape future changes in products and the service provided.

As a global company, Amway has built up a strong regional structure around regional affiliates such as Amway UK and the Republic of Ireland. Operating through the regional structure, affiliates are responsible for: • forecasting (ensuring stocks are sufficient to meet demand) • customer service • Current and Previous Case Studies • Downloads • Quizzes • Company Info • Theory Economies of scale include spreading costs over a larger output. Small Firm e. g. Advertising Advertising a bottle of shampoo in 2 countries: ? 100,000 Bottles sold: 500,000 Advertising cost per bottle: 20p 4_Developing a global strategy In the same way that Amway has a global strategy for producing, distributing and marketing its products worldwide, its strategy for promoting CSR is also global. Amway defines a global cause as ‘a social issue affecting many people around the world engaged in a struggle or a plight that warrants a charitable response. ’ The company recognises that as a successful enterprise it must build its business based on the principles of ‘relevance, simplicity and humanity’. Amway’s vision is ‘helping people live better lives’.

Developing the Global Cause Program: • helps Amway to bring this vision to life • declares what the organisation stands for • builds trust and respect in Amway brands • establishes Corporate Social Responsibility as a high priority. Amway developed its Global Cause Program in 2002. It is the result of extensive research. This involved studying relevant issues and holding discussions with organisations involved in providing help to the needy and underprivileged in communities worldwide. Some research was primary research e. g. interviewing potential partners. Other research was secondary e. . examining published sources about global trends in poverty, lack of educational opportunities etc. From the outset, Amway established some clear objectives. These were to: • build loyalty and pride among IBOs and employees • enhance Amway’s reputation as a caring organisation • make a real difference to human lives. Large Firm e. g. Advertising Advertising a bottle of shampoo in 80 countries: ? 500,000 * Bottles sold: 20,000,000 Advertising cost per bottle: 2. 5p * The fixed cost of creating the advertisement is much the same, no matter how many markets it is used in.

By expanding globally, Amway can increase its scale of operations. This leads to: • increased sales and profits for Amway • increased sales and profits for IBOs • better quality and a wider, cheaper product range for final customers. To achieve these benefits Amway continues to expand into new markets such as Eastern Europe and the Ukraine. Amway regularly seeks to develop new products in line with market research aimed at finding out what customers want. In order to attract IBOs and new affiliates, Amway needs a strong brand image.

Corporate Social Responsibility (CSR) is vital to any company seeking to build its image. CSR refers to the role that a company plays in meeting its wider commitments as a citizen. Such commitments include supporting worthy causes and always acting in an ethical, honest way. Because Amway operates in many different markets worldwide and with a range of affiliates and IBOs, it has to devise and communicate its plans for CSR activities very carefully. Recently, Amway has produced its ‘One by One – Global Cause Program’. The plan is clear and robust and is helping to maintain Amway’s reputation with all its stakeholders.

Further research indicated that people linked to Amway had a clear favourite area for the Global Cause Program to cover. They wanted it to develop initiatives concerned with children and the family. They felt that there are millions of compelling reasons to focus on helping children including. For example: • Amway is a business owned by and operated by families. • Children are the world’s future. • Children embody hope. • With children it is possible to make a lifelong difference. Research showed that: • Half of the world’s poor people are children. • Every year 12 million children die before their fifth birthday. 540 million children live in crisis situations. • Over 125 million children have no access to basic education. • Even in the most developed countries some children are left behind. Research also showed, however, that children’s needs differ from one part of the world to another. Amway therefore recognises that if its Global Cause Program is to have maximum impact it will need to be tailored to the specific needs of particular regions and areas. In January 2004 Amway activated a three-year contract to sell an exclusive range of Christmas products through European affiliates.

The programme includes a commitment to raise €500,000 for UNICEF by the end of August of each year. 06_Conclusion Amway’s ‘OneBYOne’ campaign provides a good example of the way in which businesses can make a difference in the communities in which they operate. Research showed that Amway’s stakeholders are committed to activities which better the lives of families and children. The company has therefore been able to formulate a plan and a well targeted programme to harness the commitment of its people to help others and to create a more prosperous world.

By working with UNICEF it is partnering one of the world’s most highly regarded children’s organisations. Together they are able to help children enjoy a better future. Code of Ethics: A set of principles that govern ‘right’ and ‘appropriate’ behaviour in a given field. Corporate citizen: A body, such as a business or other organisation and the role it plays in society. Corporate Social Responsibility: The responsibility an organisation has to behave in an acceptable way in its dealings with other members of society. Direct selling: Method of selling directly to customers rather than through a shop or similar retail outlet.

Economies of scale: The reductions in unit costs that come from operating on a large scale. IBO: Independent Business Owner – often an individual running his/her own enterprise selling goods. Objectives: The end purposes that an organisation or individual seeks to achieve. Regional affiliates: Partner organisations that manage and run the operation for a master company on a regional basis. Stakeholder: Anyone who has an interest in how a company performs e. g. employee, supplier, creditor, customer. Strategy: A long term plan. 05_Developing a European strategy Amway’s global campaign for children is called ‘OneBYOne’.

This illustrates the idea of making a difference in children’s lives one step at a time. The campaign is part of an umbrella cause to improve the wellbeing of children worldwide. The campaign name and logo are colourful, cheerful, optimistic and hopeful. The European part of this strategy involves working with UNICEF which is already an existing partner. Because of its excellent work with children, UNICEF was the logical choice. The campaign fits comfortably with Amway’s global strategy but is also tailored to meet local needs. At the end of 2004 Amway’s European businesses donated €500,000 to UNICEF for UNICEF projects.

This money was raised through three initiatives: • selling UNICEF Christmas and other greetings cards • making donations in multiples of 69p (€1), ? 3. 45 (€5), and ? 11. 72 (€17) when placing orders for goods • direct donations. For more information about Amway please browse: www. amway. com • Current and Previous Case Studies • Downloads • Quizzes • Company Info • Theory The Times Newspaper Limited and ©MBA Publishing Ltd 2005. Whilst every effort has been made to ensure accuracy of information, neither the publisher nor the client can be held responsible for errors of omission or commission. Glossary


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