Rationalising Business Operations to Cut Costs

In a highly competitive environment with a complex supply chain including multi serialised individual products, using multiple manufacturing and distribution channels and multiple third party service providers resulted in slow time to market, loss of direct control and duplication of costs for a major blue chip company.

One of Australia’s largest companies consisted of multiple lines of business operating independently, each managing its own procurement and product distribution via numerous complex commercial and infrastructure arrangements between the parent company and numerous distribution operations. This unwieldy business arrangement resulted in high procurement costs, operating inefficiencies, unnecessarily high inventory levels, duplicated and divergent infrastructure (personnel, facilities, systems) and higher than necessary costs of distribution.

Senior management in the company instigated a major business re-engineering program to rationalise operations and total supply chain operation.

SMS was initially engaged to develop a strategy that would rationalise the processes of each business unit into one operation in order to overcome redundancies and significantly reduce cost. SMS was retained to implement the strategy and has been retained in the long term to take on key management activities and future supply chain strategy.

A detailed feasibility study provided a clear understanding of the scope of the initial project.

With a 20 plus year track record in operational rationalisation, SMS employed a proven process in its approach to the engagement:

1. conducted a detailed feasibility study and mechanism to track achieved benefits
2. identified a client-champion who would support the strategy and approach
3. carried out detailed consultations with experienced operational staff
4. identified supply chain redundancies and associated costs through business analysis
5. implemented a rationalisation strategy
   

SMS established that improved efficiencies could be achieved through rationalisation of order taking, processing, credit management, inventory management, warehousing facilities and delivery channels. Rationalisation also included savings from decommissioning of redundant systems.

SMS implemented initial technical and consolidation solutions. Technical solutions included SAP, B2B messaging and other ERP systems. Due to the IT dependent nature of the environment, the program was technology-heavy. The company’s interface system formed the nerve centre, managing the flow of no less than thirty different message types between the parent company, its divisions and third party operations’ IT platforms.

Some of these solutions were intended to be temporary, however, to date they are still in operation.

A continual process improvement, ongoing cost savings and developmental activities to sustain business continuity.
As a result of SMS's rationalisation program, the company now enjoys alignment between corporate and business channel strategic objectives, characterised by: 

• improved service levels to internal, direct consumers and corporate customers
• a continual process improvement
• ongoing cost savings and revenue growth 
• developmental activities to sustain business continuity
• improved product management
• streamlined processed for introduction and development of new products
• encouragement of a culture reflecting constant business improvement

What's more, the company's operational staff have benefited from their relationship with SMS expertise, resulting in a cooperative and consultative ongoing change process.