Rapid Cost Reduction – Consumer Products Manufacturer
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Situation
- Multi-national manufacturer and marketer of houseware products with $500M in sales and multiple plants and DCs
- Hit by several years of eroding business volumes, industry price declines and a power shift from manufacturers to retailers (especially mass merchandisers)
- Increased offshore manufacturing has enabled mass merchandisers to source directly
- Private label and low opening price points (OPP) squeezing margins on branded products
Actions Taken
- Complete transformation of supply chain – with step change in cost structure and customer service levels
- Sourcing: reduced costs through strategic sourcing across 8 major product categories
- Manufacturing: reduced costs by consolidating plants and re-sourced key products from China
- Distribution: improved service levels and decreased costs through improved 3PL and dedicated DC management
- Inventory: increased timeliness, accuracy, and performance of forecasting, S&OP, SKU management, and inventory management
Results
- Sourcing: Strategic sourcing effort resulted in 9% reduction across spend addressed
- Manufacturing: Manufacturing facilities reduced by 33%; floor space reduced by 50%; unit costs reduced by ~20%; tooling costs reduced by ~20%; projected CAPEX reduced by 50%
- Distribution: Customer fill rates increased from below 80% to above 98% for “A” customer segment; Number of DC facilities reduced by 75%; total floor space reduced by over 60%
- Inventory: Increased turns from 2.8 to 4.0; SKUs reduced one time by 30% - with process established to manage obsolescence and new additions