An $8 billion consumer products company was facing intense price pressure passed down through the supply chain due to increased competition from low cost manufacturers in other countries. Prices were being continually driven down and results had moved into the red. An industry expert’s report stated that “The company cannot continue to be the high quality industry supplier and remain price competitive.” Without significant cost improvements the company faced the potential for drastically reduced profits and market share.
The company’s original strategy to overcome this was to look for many small improvements in variable costs across the operations. Unfortunately, this was only creating small, incremental gains that were being outstripped by the rising price pressure. This plan was falling short of making the company competitive again.
In addition, even though effort was being applied at a strenuous rate there was little to show for it. This caused frustration and anger within the supply chain, and there was the mindset that it was a hopeless endeavor. The organization looked for a an alternative strategy, and Stroud was brought in to deliver rapid, step-change improvements in the performance of the operations.
Stroud took a strategy opposite to the small distributed wins previously tried. Instead, they focused on larger targets that had been considered already optimized. Stroud saw the opportunity to improve the bigger, higher performing facilities and to then consolidate the smaller facilities and dramatically reduce costs. This meant going into one of the top facilities in the company to increase output substantially.
While benchmarks showed there was little opportunity to improve, a zero-based approach looked past them to the fundamental physics of how a line or machine could operate and highlighted much more of the true opportunity. From there, strategies for increasing output and problem solving were applied to realize these previously hidden gains.
The possibility of dramatic improvement in any facility changed the client’s entire business strategy. This alternative focus resulted in the closure of 4 plants in a 20 plant division and supplied significant additional cash through capital avoidance. It also moved high value resources from under-performing areas of the company into areas where they were given a greater chance to contribute to the success of the company.
After working with Stroud, the company realized $63 million in labor productivity savings, $17 million raw material savings, and over $100 million in overhead costs. They even reduced customer complaints by over 50%. By approaching the situation with a results focused approach and putting the big buckets of opportunity back on the table, Stroud was able to make a dramatic improvement to the company’s bottom line. According to the director of operations at the company, “The Stroud team brought a concept of structure and accountability to our organization that is helping us take our business to the next level. The result is an action-based culture that is committed to continuous process improvement in all our operations.”
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