'This business was operating in a mature market with their margins being severely affected by competition from low-cost importers. From the outset, we identified organisational complexity as a key issue preventing management from isolating areas of profitability.
The Corporate team immediately targeted the loss-making outlets, warehouses and unacceptably high stock-out rates, formulating an initial response to the fixed-cost inefficiencies undermining the business.
Through cannibalisation analysis and regional competitor analysis, our review concluded that warehouse capacity and point-of-sale locations could be reduced by 40% and 30% respectively without sacrificing significant sales volume.
Our review also recommended a significant reduction in non-performing SKUs as part of a drive towards improved profitability. Once implemented, these changes facilitated the development of improved pricing standards and discounting controls that enabled management to regain control over their inventory and buying processes.
With improved working capital systems management in place, we then targeted the high service costs and lack of relevant customer segmentation within the business. Surprisingly, we discovered that in most instances, service level commitments were well above client expectations and were an unnecessary burden on cash flows. We developed an internal system to track these costs and, from the results, were able to build a more appropriate price discrimination model. This provided management with a more sophisticated insight into their customer relationships, leading to the reallocation of valuable marketing resources from secondary accounts to high-value customers.
Pleasingly, the organisation is now experiencing significant improved profitability and consistent growth. The systems and controls we developed for the business have provided management with the tools necessary to make informed decisions in an increasingly complex manufacturing environment.'