1. Becoming the Low-Cost Producer Through Organizational Realignment and Business Process Improvements BackgroundBackground The client, a major affiliate of a Fortune 500 consumer foods firm, held the leading position in its retail market. The company’s objective was to streamline its operations and organization, become the low-cost producer, and achieve significant cost savings during the next two years. These objectives were driven not only by an internal need for increased profitability and an external environment of growing competition, but also by a complex marketplace and an oversupply of raw product that exerted increasing price pressure of the business. SPG’s Consulting AssignmentSPG’s Consulting Assignment SPG consultants were engaged to conduct a brief but detailed analysis of the client’s business operations and corporate functions. The client had previously embarked on a Total Quality Management (TQM) program and required that all consulting activities support that effort. SPG - Business Analysis FindingsSPG - Business Analysis Findings The SPG Analysis and Design effort revealed significant opportunities to reduce operating expenses and improve operational performance and customer satisfaction while improving the client’s implementation of TQM principles. Specific opportunities were identified to:  Develop a streamlined organization structure that is aligned with the company’s strategic vision.  Improve communication within the organization and clarify the roles and responsibilities of individuals and groups.  Align the supply chain organization and provide the tools and methodologies to be successful in a more competitive environment.  Improve customer satisfaction levels.  Improve control and effectiveness of factory operations.  Improve the client’s TQM efforts, moving from a program with modest results to an effective management philosophy.  Provide a significant driving force to implement the required major changes. Results and Quantitative BenefitsResults and Quantitative Benefits SPG consultants partnered with client personnel over a 15-month period to achieve dramatic results that will continue to grow over the coming years. These benefits include:  A current fiscal year earnings benefit of over $30 million, an annualized impact of over $40 million immediately, and up to $75 million annually in 1-2 years.  A return of over 10:1 on the client’s investment.  A streamlined and restructured organization, with a 15% reduction in salaried staff and a flatter management structure.  Improved customer service and satisfaction, including a 90% decrease in customer deductions due to invoicing and order entry problems.  Improved supply chain effectiveness, including development of mechanisms to reduce inventories by over 30% and rationalization of a distribution and delivery network. In addition to these quantitative improvements delivered to the client, other significant project benefits have been realized. They include:  A company-wide understanding of the organization’s mission and strategic directives.  Improved organizational effectiveness resulting from streamlined processes and clearly defined and communicated roles and responsibilities.  A work team concept that integrated quality and maintenance activities into the factory operator’s responsibilities to dramatically improve effectiveness and morale and revitalize that factory organization.  Product focus and rationalization, achieved by breaking existing paradigms of what is required to service markets and generate improved profits.  Schrudder Performance Group, LLC. Proprietary Information - 1701