A leading food and beverage manufacturer with more than 40 U.S. plants was losing value through its inventory. There was no single issue, but rather death by a thousand cuts.
Product was getting reworked. Other product would get damaged. Other product got liquidated for a fraction of its worth. Each was relatively small and local on its own. But together they hurt COGS across the network.
And no one could see the whole problem. There was no structured approach to map and quantify the issues. No governance to make anyone accountable for shrinking them. Because they were all so small in isolation, no one owned the initiative.
We ran our cost reduction methodology in four phases. First came the pre-work to establish a baseline and stand up improvement teams across the organization. The scope of addressable costs identified during this phase totaled more than $204M.
We then went into opportunity identification mode to find losses in the form of idleness, overproduction, or contractual inefficiencies. We validated every opportunity and made sure each had a structured optimization plan with clear accountability. Ultimately we aligned on 25 discrete savings plans.
Finally, we helped installed governance and incentives. We established a dual ownership structure so each target had two people watching it. And the incentive mechanisms gave the management to the new targets worthwhile.
We helped move the baseline from $204M to $163M, and the network now runs at the lower number consistently. Success looked like 25 individual wins, none necessarily huge on its own. The largest plan delivered $7.9M. One initiative raised liquidation cost recovery from 39.8% to 44.2% over six months (meaning the company simply got better at selling distressed product). It was several dozen incremental improvements stacked on top of each other that led to the larger win.
Finally being able to count the invisible losses and see how they impacted the organization created the confidence to address them. Giving every plan a measurable KPI and dual-ownership governance helped ensure the targets were met and became the new normal. And now the client has a repeatable method to hunt for the next batch of incremental wins.