- Food and Beverage
- Company Type:
- Food Manufacturer
- Company Size:
- Job Functions:
- BI Strategy and Planning, BI Requirements Analysis, Custom Application Development, Performance Management
Challenge: How to optimize operational efficiency, inventory, and customer service in a complicated high-mix, low-volume manufacturing environment serving dozens of powerful customers with highly-variable order patterns – all in a cost-cutting environment.
A Passion for Flavor
Our client is a $3 billion global leader in the manufacture, marketing and distribution of spices, seasonings and flavors to the entire food industry. Its customers range from retail outlets and food manufacturers to food service businesses. The company’s $1 billion industrial business supplies products to many of the world’s top food manufacturers and food service businesses from locations primarily in North America, Europe and the Asia/Pacific region.
While the company’s name may not be on the package or menu, its products add great taste to a wide range of packaged food including snacks, savory side dishes and cereals, as well as restaurant items that include sandwich sauces, chicken coatings and bread toppings.
Delivering the Tastes Consumers Love
In serving many of the most well-know food manufacturers and food service companies in the world, the company’s Industrial business deals daily with the complexity of being a high-mix, low-volume manufacturer. With large powerful customers demanding high service levels to meet their own just-in-time manufacturing systems, and with a high degree of demand variability, the Industrial group was challenged to schedule its plants efficiently and to determine the proper levels of finished goods inventory to hold for its most important customers.
Further, the information needed to gain a true picture of order patterns and inventory levels was stored in several legacy systems, further complicating the task of improving gross margins and avoiding inventory obsolescence.
BI: A Key Tool for Conquering Operational Complexity
Given the inherent complexity of the Industrial group’s operations, and a strategic desire to improve margins, it had become painfully clear to the Vice President of North American Operations and his key directors and managers that they lacked timely access to detailed, high-quality information about customer order patterns, the volumes of products manufactured and sold, the relative profitability and importance of customers, and the levels of product inventory held for customers.
This made it very difficult to schedule production efficiently, to determine optimal order expediting tactics when needed, and to manage inventory to avoid obsolescence – all which worked against being able to improve gross margins and optimize assets to meet company financial objectives.
To respond to these needs, the company selected DecisionPath to design, develop, and implement a custom BI application that provides all the information and analytics needed by the operations management team to cope with the inherent complexity of its business. This information enabled Industrial to implement a robust Sales & Operations Planning process – and to thereby make significant progress toward meeting the challenge of optimizing operational efficiency, inventory, and customer service – all in a cost-cutting environment. The BI application also armed Industrial’s team with customer-specific order histories – including volumes purchased and prices paid at the SKU level – which in turn enabled the company to collaborate with its key customers to further optimize customer service and inventory levels.
Improved Margins – Fuel for Product Innovation and Improved Product Mix
The BI application for S&OP has been an integral contributor to a strong improvement in the Industrial group’s operating income – from 9.0% of sales prior to deployment of the custom-designed BI application to 9.6% of sales three years later. In dollar terms, this improvement translates to $7.1 million in incremental operating income.
Margin improvement is a core business strategy for the company, providing returns that are continuously reinvested in Industrial’s product innovation program. This allows the company to stay close to consumer tastes, develop flavors that consumer love, maintain its partnerships with leading customers, and shift its product mix toward higher-value-added products – thus creating a virtuous cycle of strong margins being leveraged to create high-margin products that deliver strong margins. By leveraging BI for S&OP, the Industrial group has experienced first-hand the profit impact of business intelligence.