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CASE STUDY | Industrial Goods
Implementing a new organisation and reviewing the supply chain process
This is an example of a longer-term project that we carried out for a client. Firstly, we supported them to define and implement a new organisation. Then we focused on the supply chain and on how to turn it into a competitive factor.
Our client, a pharmaceutical multinational, called on us to help them review their organisational model. They were aware that the way they were structured was not consistent with the new market scenario, characterised by decreasing margins, the growing importance of pricing, marketing and packaging and the changing role of R&D. Furthermore, in this context, there had been a recent change at the head of the most important business unit.
For this first stream, our objective was to align the organisational structure to business priorities and to grant the successful implementation of the new model. We began by carrying out interviews to identify the priorities for change; we then came up with three organisational options. Top management was constantly involved to ensure commitment. Once one option had been selected and developed, we laid out and implemented the new structure up to third-line management, and we revised the company’s key processes, in particular technological innovation and Product Lifecycle Management. We then decided upon the new governance model and supported the implementation of all the changes via an internal communications plan.
Once the new organisation was defined, the second front we acted upon was the client’s supply chain management, in order to make it competitive. In particular, we had to address a low service level and the lack of a monitoring system for back-orders. This situation was compounded by the fact that the supply chain function lacked a clear scope, in terms of costs and resources, and constantly had a high stock level along the entire chain. The head of this function had also recently changed.
We carried out a diagnosis of current processes, flows, stock levels, service levels to distributors, logistics costs, minimum batches, orders, demand variability, and safety stock reduction simulations. This allowed us to set targets for the new supply chain model.
The impact of this entire project was wide reaching for our client: the implementation of a new organisational structure, up to third-line management, and a review of some of the company’s key processes, namely Technological Innovation and Product Lifecycle Management. Moreover, we lead to the introduction of a supply chain book, detailing the to-be supply chain model, a gap analysis versus the current model, the improvement actions to be taken, their economic impact and the master plan for implementation.
Defining and implementing a go-to-market strategy
Value Partners assisted the management of a world leader in the design, manufacturing and sales of ceramic tiles in the redefinition of a new product segmentation. The transformation was from a segmentation based solely on product technology and price range to a more sophisticated one, based on customer needs and behaviours. This exercise resulted in a new product portfolio strategy and a revision of brand positioning.
After this phase, the company decided to review the go-to-market strategy in the domestic market. In fact, the company was present in the market with two separated sales force, organized by brand, with different commercial terms, and quite loose level of control. It was serving a high, sometimes unprofitable, number of dealers, not enough known in terms of characteristics and potential. The result was a high cost of selling and lost opportunities in terms of synergies.
The objective of the project was, on one hand, to define the new approach in terms of product offering, brand and commercial terms, articulated by channel and dealer segments, and on the other, to redesign the sales force organisation, in order to maximize effectiveness by dealer segment; exploit brand synergies, avoid duplications and reduce costs.
In addition to the traditional desk diagnostic, the team conducted a large number of interviews with dealers and sales force executives in ten regions of the country, in order to understand the buying process and the company’s performance; prepared a questionnaire for the sales force, which allowed us to classify dealers by type and potential, and analyse the sales force performance and practices.
The team consequently produced:
• A plan by customer segment (e.g. crash programme on top accounts; a programme to abandon unprofitable ones) with a specific set of actions (products, brands, terms etc.) articulated by segment of dealers targeted. A detailed implementation programme (actions defined by each individual client) for a sample area was also prepared with sales executives at local level
• A detailed design of the new unified sales organisation, including its sizing, the design of area and subarea boundaries, and the definition of roles and new processes, as well as the tools to control sales organisation performance.
This ultimately reduced costs by several million Euros, and led to a very much improved and targeted approach to clients, which in few months showed important results, especially for top accounts and previously not coordinated clients.
Our team is now ready for suggestions to colleagues on home refurbishing needs!
Assessing the supplier base and generating substantial savings
Our client, a leading European white goods manufacturer, asked us to assess the degree to which its supplier base was competitive. In particular, the client asked us to look at its suppliers in an Eastern European country. Their concern was that the supply base, even though it was based in a so-called low cost country, did not provide them with any competitive advantage in terms of cost. On the contrary, some items were cheaper in Western Europe, and in the company’s home country as well.
The team got to work, with the objective of assessing the supplier base and identifying savings. We selected priority categories in terms of spending, potential savings, and those presenting particular issues. We made a further selection, picking out the most representative items, considering only those with relevant volumes and with a considerable product range extension. Finally, we took the selected products and analysed their cost structure. This allowed us to apply a should cost methodology that enabled us to calculate the ideal cost of an item, considering improvements achievable through short-term negotiations with suppliers and with investments or structural changes.
By the end of the project, we had identified 15% of savings on the most relevant items for our client, and devised an implementation plan with both quick wins and longer-term actions based on feasibility and impact
Relaunching a business
Our client, a commodities manufacturer, wanted to improve its positioning in five specific countries in both Western and Eastern Europe. To begin with, they asked us to understand the future trends of the business in which they operated. In particular, they wanted to know which applications had an interesting outlook for them and how they should try to enter/enforce their presence in the most interesting ones.
To come up with a strategy, the team had to consider three main areas: gathering hints from comparable businesses (e.g. How are players acting in businesses with similar commoditisation issues?; Which actions can be replicated in our industry?); mastering the industry trends (e.g. What will demand be like in the years ahead?; What are the competitors’ new strategies? How is the distribution channel evolving? Which are the key success factors for service distributors?), and analysing the client’s situation in the five selected countries (e.g. Which is the positioning? To what degree is our client matching the key success factors in the selected countries?).
The team, together with the client, worked on a variety of sources, from purely qualitative interviews to data gathering as starting point for complex quantitative analyses. The project resulted in the definition of two new commercial approaches: a shift towards a solution-provider logic, and a further development of the wholesale channel through a more articulated commercial strategy. These approaches, leveraging existing applications, could apply in all five of the selected geographies, notwithstanding the differences among the countries.
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