Case Example

Multinational Manufacturer and Brand Marketer of Packaged Foods

Industry and Competitive Landscape

The packaged foods industry has become increasingly competitive in many segments. The case company occupies a top position in several easily recognizable consumer categories such as breakfast cereals, backing goods, grain-based snacks and others. Several of its top categories have recently experienced some downturn due to changes in consumer buying habits. Consumer health trends such as increased preference for whole grains and reduced sugars are examples. Increased competition from organic and private label specialty store brands has also increased pressure on revenue, volumes, and margins. Product innovation to remain relevant to the new consumer also has been critical. Private label specialty brands have provided a high degree of downward pricing pressure with some product categories selling for significantly less than those prices enjoyed some few years earlier.

Organizational Situation

The case company knows that their future success demands that they get more from their manufacturing sites. Growth is hard to come by, and it is extremely critical that they get more from their assets moving forward and so if growth is slower, they need to extract more production from their asset base. If growth accelerates, they need to defer capital to create organic food capacity. Senior leadership for supply chain feels that it is very important that supply chain associates understand the cultural shifts and business strategies of the firm, focused on intelligent and enterprise wide efficiency. The firm named this combination strategy “Value Stream Culture” or “VSC.” The firm’s supply chain has historically been manufacturing-centric, with many KPIs focused on cost per unit produced. This drove behaviors of full and long production cycles with few chan- geovers. To enable agility and growth, the firm’s supply chain leadership feels that a more enterprise margin management mindset is needed, one that optimizes value stream processes over functional measures. Functions are incentivized to optimize their own performance at the expense of the broader value stream. Supply chain leadership feels that a value stream orientation will force a set of activities and processes that enable good quality trade-off decisions. VSC, along with specific firm-focused leadership behaviors, is intended to directly enable the employee engagement mindset necessary to enact the growth strategy. Supply chain leadership also feels that the culture of the firm needs to move to a greater degree of awareness of how supply chain actions impact downstream measures, particularly Return on Invested Capital (ROIC). No one currently owns the value stream. Supply chain leadership therefore feels that VSC must be enabled and activated at scale within the global supply chain organization.

Market Trends Impacting Business Performance

Firm leadership identified the following business performance issues as the immediate need to:

  • • Reignite Growth of Traditional Product Categories
  • • Enable Growth of New Product Categories (i.e., Organics and Natural - health-oriented categories)

To address these challenges, leadership also defined key leadership focus

areas that they felt the supply chain must adopt to support the business

conditions and growth objectives. They are:

  • • Build “VSC” - which is comprised of reducing waste, human and food Safety, and end-to-end performance improvement
  • • Breaking Down of Functional Silos - plan, source, make and deliver have different leadership, metrics, and business drivers
  • • Supply Chain Agility - ability to adapt and move supply chains away from traditional to those more driven by customer and consumer trends, demand and behavior

Leadership Response

In this case, the supply chain leaders realized that they needed to encourage their associates to develop new ways of working that included shifts in mindset and attitude, as well as changes to processes and technology. Some of the leadership enablers identified for development included servant leadership, which focused on building trust, accessibility, and the removal of barriers between functional and boundary spanning processes. Additionally, the firm recognized the need to build an active waste reduction mindset based on self-motivation, individual inspiration, and engagement, rather than top down directives. The firm realized that cross-functional integration behaviors and the active creation of more holistic cost management were something that needed direct attention through the building of cultural awareness.

 
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