Please enable JS

Complexity optimization in the dairy industry

Client situation & approach

A leading manufacturer of fresh dairy products faced a low operational profit level (2% versus N° 1:14%) despite turnover growth and a loss of market share of the third player in the market. This was mainly due to the impact of a growing complexity: internationalization, market volatility, fragmenting consumer demand, multi-sourcing.

A global performance program was needed to eradicate value-destroying complexity that does not add any competitive advantage and differentiation and to manage value-creating / adding complexity reducing negative impact on direct and indirect costs.

EFESO deployed a complexity optimization process:

  • Assessment of current complexity cost and real profitability by product and client (simplified ABC costing)
  • Identification, evaluation and prioritization of causes of complexity
  • Definition of solutions for complexity optimization (eradication of value losses and monetization of value enhancers: e.g. portfolio rationalization, late differentiation manufacturing process deployment, redesign to cost activities, pricing optimization, SG&A costs reduction
  • Implementation of a pilot on complexity optimization
  • Expansion to the entire organization
  • Roll-out of a complexity management process and development of complexity management capabilities

Results

  • Within 3 years, the business achieved a 5 point increase in operating profit and significant improvement of ROCE
  • New stockholder entry in the company after overall improved attractiveness of the company