Cost Savings & Supply Chain Efficiencies
The Challenge
To respect the competitive advantage that our client has got from the Strategic Customer Growth Process, Company names have been changed.
Company ABC* is a prominent FMCG manufacturing and distribution companies. Key to its success has been its unrivalled distribution network.
Customer XYZ* owns an iconic brand. However, with increased global competitiveness, cost control was becoming an ever increasing market challenge.
The Argil Strategic Customer Growth Process™ (CS) was initiated with the ultimate goal for Company ABC and Customer XYZ to GROW profit together through joint effort and collaboration.
In order to gain a deeper understanding of what the real measurable drivers were for Customer XYZ, Argil conducted a series of interviews with their key decision makers and influencers. The feedback of the interview results was given at a Joint Workshop which both Company ABC and Customer XYZ attended. Here both parties had the opportunity to work together to deliver win-win solutions
The Approach
The CS interview process uncovered some of Customer XYZ’s major challenges:
“Growth and demand are not a problem – capacity is the problem.”
“Our business is antiquated. We need to increase efficiencies.”
“Operational excellence. Absolutely low cost, need to look at every cost centre and become more efficient throughout the chain.”
And specifically in reference to Company ABC, “In our 16 year relationahip, we focused on procurement, service and quality. We haven’t asked them to look at anything new. We haven’t challenged them, ‘where could you add value?’”
Another important outcome of the interview process was Customer XYZ’s desire to enjoy a Partnership with Company ABC. It became clear that Customer XYZ wanted to see Company ABC as another shareholder in the business.
A comment from Customer XYZ…
“Delivering on the basics just gets us into the game. In our two businesses we need to maximise the benefits of what we can synergise, e.g. distribution, brands etc. – the opportunities are enormous.”
The results of the interviews produced the following focus areas, Strategic Relationship, Attention to Your Profitability, and Adding Value.
The Result
One year post the Joint Workshop, a strategic team representing both companies had been created. This team had committed themselves to investigating mutual opportunities, “There’s been a big change. This is the best relationship you can get. This Process was the catalyst – but both of us have driven it.”
Most importantly, as a result of the Argil CS Process, there was cost savings for both businesses, “It’s a very good relationship – we have moved to a Partnership through a number of programmes including:
- Consignment stock – we have signed a new contract with Company ABC whereby they took over the management of the stock in our silos. This ensures we always have the right replenishment stock, quality and planning.
- Sharing distribution routes and management of our rural depots. This rationalisation of our dual transport and warehousing costs has saved ‘millions’ of $’s per annum.
- Pricing of the raw materials – looking at pricing more openly, sharing of information.
- Sales: putting together of joint promotions.”
In conclusion, previously these two FMCG companies had to move from a Vendor to an authentic Partnership relationship in order to move their conversations from daily operational issues to more strategic conversations and thinking, which has ultimately had a dramatically positive impact for both companies – a true win-win situation.