The Customer Supply Chain Business Essay

The guest tack on Chain Business moveThe report consists of a project entitled Pillsbury Customer Driven Reengineering under askn as a part of the course curriculum for the subject Business surgery Reengineering (BPR). As a part of this project, after reading the lineament, a preaching took place between all the group members so as to clearly identify the problem definition.As a next step, discussion of the non-homogeneous issues faced by Pillsbury were discusses followed by the evaluation of the causes undertaken by it. Competitive pressures, engine room advances, and demanding consumer preferences were causing all companies in the viands industriousness to reexamine their trading operations and attempt to eliminate waste and inefficiency through verboten the solid food scope. The Efficient Consumer receipt (ECR) effort was a multi-industry project, ECRs goals were to reduce cost and drive inventory take aims tear through step up the system, slice simultaneously en hancing capabilities to becoming the needs of diverse consumer food market segments.Pillsbury executives were faint whether their bon ton was prep bed for the impertinently ECR environment. So, this report basically includes the stainless experience involved in undertaking the planning of BPR at Pillsbury and the versatile chassiss it went through during the transition and the challenge faced by it i.e. whether to go for a continuous progress program having a short term deliberate or a design of processes which was more(prenominal) futuristic.OBJECTIVES OF THE STUDYTo figure the practicable implementation of BPR classroom conceptsTo understand the degree of interlinkingity involved in planning BPR implementationTo understand the splendor of customer driven reengineering cash advance in order to adopt a tweak strategy for the perfect fork over chain i.e. wear matching Pillsburys purchasing, manu incidenturing, and scattering operations to consumers purchasesTo understand how to use the available resources in an optimum mannerTo understand the implications of a continuous improvement program Vs Redesign of processes.To understand the importance and criticality of various performance treasures like first principle costing.COMPANY INTRODUCTIONPillsburyis a blot name used byMinneapolis-establishGeneral tarryandOrrville, Ohio-basedJ.M. Smucker Company. Historically, thePillsbury Company, overly based in Minneapolis, was a rival company to General Mills and was one of the worlds largest producers ofgrainand other foodstuffs until it was bought- unwrap by General Mills in 2001.Antitrustlaw necessary General Mills to care s oddity off some of the increases. General Mills kept the rights to refrigerated and frozen Pillsbury returns, while drybakingproducts and frosting are now sold by Smucker under license.Leo Burnettwho created PillsburysDoughboyandJolly Green gargantuanconsiders them two of the agencys lift five brand icons.ProdPack- Pillsbury-Cakemix-Small.jpgNOTABLE ACHIEVEMENTSPillsbury once claimed to hasten the largest grainmillin the world at thePillsbury A Milloverlooking beau ideal Anthony Fallson theMississippi Riverin Minneapolis. The building had two of the nearly powerful direct-drivewaterwheelsever built, each putting out 1200horsepower(900kW). on that point are now plans to transmute it into a loft-style apartment building. The Cunningham Group plans to convert six historic buildings to a mixed-use project varying from 6 to 27 floors in height. The project will include 895 units of housing and 175,000 square feet (16, three hundredm2) of commercial-grade space, including the Pillsbury A Mill.HISTORYThe company originated in 1869 whenCharles A. Pillsburybought a share in a Minneapolis flour mill. After the purchase of additional mills and the mental hospital of enhancements to the milling process, his firm was reorganized in 1872 as C.A. Pillsbury and Company. It was sold in 1889 to an English syndicate, which merged Pillsbury with other mills in their holdings to form Pillsbury-Washburn flour Mills Company, Ltd., with Charles Pillsbury as managing director. The Pillsbury family re introduceed ownership of the company in the 1920s, and it was structured as Pillsbury Flour Mills Company in 1935. In 1972 Pillsbury began purchasingBurger pansy fast-food outlets, and it soon came to own the full chain. Through theGreen Giant Company, acquired in 1979, it began selling canned and frozen vegetables and frozen prepared foods. It also acquired Hagen-Dazs, maker of premium ice cream and frozen yogurt, in 1983.Pillsbury was have by British company Grand Metropolitan, PLC (renamed Diageo PLC) from 1989 to 2001, whenGeneral Millsacquired roughly of Pillsburys assets (Burger King remained as a separate divergence of Diageo until 2002). The Hagen-Dazs brand was marketed through a joint licensing agreement withNestland General Mills.PRODUCTSThe company manufactures a wide variety of consumer food products under the Pillsbury brand, including frozen biscuits and rolls, breakfast foods, biscuit popsicle, cake mixes, and snack foodhttp//s3.amazonaws.com/gmi-digital-library/8b86b131-cccf-4292-b584-d216cf00fdd7.jpgBiscuitsBreads Grands Cinnamon RollsCinnamon RollsBuffalo Chicken Crescent PuffsReady To Bake quisling BrandsStrawberry Marshmallow PieBiscuits, pies, flour, pizza pie crust, cookies, crescents, cinnamon rolls and various partner brands like Green Giant and Cascadian Farm.CASE INTRODUCTIONPillsbury entered Customer Driven reengineering initiative expecting to flow across meaningful levels of cost decline and efficiency. To its delight, it also discovered a impudent-fashioned fashion to compete.Competitive pressures, technology advances, and demanding consumer preferences were causing all companies in the food industry to reexamine their operations and attempt to eliminate waste and inefficiency throughout the food chain. The Efficient Consume r Response (ECR) effort was a multi-industry project .ECRs goals were to reduce cost and drive inventory levels down throughout the system, while simultaneously enhancing capabilities to meet the needs of diverse consumer market segments. Pillsbury executives were unsure whether their company was prepared for the new ECR environment.The executives perceived that Pillsbury lacked several critical capabilities to develop in this new environment. In 1991, Dan Crowley as Controller of Green Giant, had launched an activity-based cost (ABC) initiative to examine the groups towering cost structure. The study revealed startling plant-to-plant variations in costs for essentially the equal process, large dispersion of actual costs from the companys standard cost per case.In August 1993, Crowley and Slocumb took a BPR proposal to CEO, Paul Walshs, Strategy and Policy Group, which comprised the di pot presidents of Pillsburys major condescension sector units and the top functional departme nt heads. The proposal identify a process which would complement Pillsburys existing strategic plan to secure top quartile financial performance amongst its strategic peers.The case describes the various efforts undertaken by Pillsbury during this transition and the various phases of the reengineering problem detailing various activities undertaken in all phase. The major challenge faced has been a choice between design of processes or continuous improvement because the cigarette set in the preceding stages seemed a bit too achievable in the later stages contract FOR REENGINEERINGCustomers perceived Pillsbury as an average company, non the best, non the worst, and without much innovation. nates Mann, Senior delinquency President and General Sales Manager, and some other neophyte to the Pillsbury senior instruction team, concurred with McWilliams assessment We were viewed as a laid- patronage midwestern company, one that institute it difficult to create a sense of urgency .McWilliams snarl that Pillsbury had to become a different company if it was to change the perception of customers.Pillsbury executives were unsure whether their company was prepared for the new ECR environment. The executives perceived that Pillsbury lacked several critical capabilities to win in this new environment.First, the company was still organized according to handed-down functional by-lines purchasing, operations, distribution, finance, and marketing and sales. This establishment led to local excellence and optimisation of the singular functions but not necessarily to the optimization of the entire evaluate chain.Second, the companys financial measurements and performance measurement system reinforced local optimization.The food market had become fragmentise and the majority finishs taken by the consumer were make in the retail environment diluting the effect of the brand image. Thus Pillsbury had another challenge to transform its gird length relationship with t he retailers (transaction based) to relationship oriented.DRIVERS FOR BPR AT PILLSBURYHighly competitive environment.Pillsbury lacking the necessary capabilities to compete in such(prenominal) environment.Lack of optimization of the entire encourage chain.The need to transform the arms length relationship with the retailers.To have an Information system to enable fact based marketingTo develop a customer driven make out chain i.e. transition from push to pull strategy of supply chainEye opening results of activity based costings. The project team prepared the classic ABC whale curve which showed a few product lines producing all the profits, with the rest SKUs either breaking-even or losing money. found on the insights from the ABC analysis, Green Giant management closed close a half dozen plants and consolidated operations more competently in the remaining plants. Crowley consequently took on a broader finance role at bottom Pillsbury as Operations Controller and extended the ABC analysis to many of the dough manufacturing plants.Pillsbury now had good insights close to the cost drivers for its cost of goods sold. The weak striking was developing comparable study for its warehouse, sales, marketing, and promotion expenses. It had no ability to hint these expenses to its customers so that it could produce individual customer PLs.Skepticism that TQM was delivering its promised benefits to the PL bottom line within a reasonable time frame. For example, an internal study compared companies cognize to have adopted TQM principles with a control sample of non- TQM companies. The study found no discernible difference in financial performance between the two sets of companies.PROCESS MAPPINGSVISION Crowley and Slocumbs vision of a potential for 15% cost improvement (about $300 one cardinal million) in a staid and farm food processing company was met with some understandable skepticism and disbelief. patronage that, Walsh and his management team tryd to Crowley and Slocumb a modest budget and 90 days to develop a business case to determine whether a $300 million cost reduction was possible.Crowley was appointed to a new position, ungodliness President for Customer Driven Reengineering, and Slocumb became Vice President for Business accomplish Reengineering. The business case was to focus on cost and margin improvements in three major divisions Pillsbury branded products, the Green Giant products, and the frozen pizza businesses. These businesses had $2.5 billion of sales in Fiscal Year 1994.Reengineering mannikin IThe Pillsbury team selected a consulting firm to work with them to help build the business case. Three months of analysis led to identifying three core business processes that offered targets for improvement Customer Supply Chain Brand watchfulness New proceeds CommercializationThe Customer Supply Chain (CSC) was decomposed into three sub-processes Total Customer Development Fast Flow Demand Replenishment Value B ased Sourcing and SupplyThe team then proceeded to identify the opportunities for process improvement within each of the three CSC sub-processes.CUsersdellDesktop9-c89015168d.jpgCUsersdellDesktop10-19289f286e.jpgValue Based Sourcing And SupplyThe third CSC sub-process, Value Based Sourcing and Supply, focused on Pillsburys extremely complex system of vendors and sourcing arrangements for its more than $500 million of raw material purchases.Historically, Pillsbury had rock-bottom its material costs by exerting price pressure on its suppliers. still gains from such price pressure were considered limited. The project team believed that more on the table and robust ingredient specification would allow them to select more efficient vendors, and that additional gains could be realized by leveraging vendor resources and knowledge. To gain these benefits, however, vendors would have to become partners with Pillsbury in a total cost reduction process. Cost savings from Value Based Sourcin g and Supply were estimated at about $40 million (around 8% of purchases), plus savings in working capital reduction of about $14million.Outputs of phase 1 A business plan that promised margin improvements through cost reductions and revenue enhancements of more than $ hundred million, plus reductions in working capital of about $25 million.Reengineering form IIPhase II was launched in January 1994 to determine whether the business case developed in Phase I was feasible and realistic.About 25 Pillsbury employees, supported by the external consultants, spent four months analyzing customer information bases on more than century top accounts, conducted in-depth interviews with key customers and suppliers, and mapping and assessing the give tongue to of all existing internal business processes in the customer supply chain.The study of internal processes revealed highly complex, time-consuming processes with dozens of handoffs, and multiple cycle of requests for decisions and resour ce authorizations. The customer interviews revealed that important food retailers, wholesalers, and brokers were moving aggressively prior with plans for category management. Category management promised to give retailers far more impressive management capabilities over their farm animal shelf space allocations, SKU rationalization, and demographic marketing plans.The Phase II studies confirmed the vision established at the end of Phase I (see Exhibit 17)that reengineering the customer supply chain could provide upwards of $100 million in benefits.About half would come from working more closely with customers-adopting a more focused customer segmentation strategy, targeted marketing using local demographic information on consumer purchasing behavior, and exploiting store-specific cost and profitability information to promote the well-nigh useful mix of brands and SKUs for both Pillsbury and the local store. The other half would come from better managing Pillsburys entire supply chain-from growers and other key vendors, through manufacturing, transportation and distribution to warehouses and individual stores.It needed to take activity-based costing (ABC) down to retail store level PLs. The old financial model calculated standard costs per case and produced product line PLs. The new model will measure activity-based costs of entire processes and give Pillsbury customer PLs.Service based set shifting its pricing focus so that it can charge more for special dish outs that some of our customers may desire but that others do not want. It can define a base level of service that e very(prenominal)one receives, with an explicit statement of what that includes.Major change in measurement performance measurements will need to be driven by customers and consumers expectationsTHE CHALLENGEIn June 1994, the Pillsbury team had completed the customer analysis and was ready to move into redesign. ahead the meeting to present the findings and recommendations to the Int egration Committee, Slocumb expressed some concern about the current set of recommendations.The business case to achieve $100 million in cost savings and margin enhancements was then credible. further the target may be too reachable. People may obtain the $100 million in cost savings from local process improvements, not from the complete redesign of its high-level business processes that were described in Phase I. the target of $100 million had come to be the objective or else than the fundamental redesign of our Customer Supply Chain.If we get $100 million in benefits, thats certainly a worthy goal, but it will not redefine the organization. We have a choice whether to be a company with a $25 stock price, or take the actions that will take us to a $50 stock price., Tom Debrowski, Senior Vice President of Operations and Chairman of the Integration CommitteeDECISIONPillsbury should be re-designing the organization around customer and consumer prizes to create a new and sustainable competitive advantage. It should strive to be the best in providing the freshest product at the lowest cost to retailers along with unique consumer insights from its superior information systems.It can achieve the $100 million without redefining the course they do business. But to achieve the $300 million, it will have to become a very different supply organization. It will have to get the supply chain to a high level of competitive fitness by get cost savings that will make it more efficient than its competitors, and, then generating growth through its value-added consumer insights, getting the right product to the shelf at the right time at low cost to the retailers. The largest barrier for achieving this level of competitive fitness is introducing and managing change. Multi-skilled, multi-functional teams, including finance, need to be working with our customers.SOLUTIONTo achieve the $300 million improvements, Pillsbury needed to approach the organization with a exclusively open mind, to think the unthinkable. It will force it to think completely out of the box if they are going to achieve benefits of that magnitude. They need to stop managing individual functional departments, and begin to manage core operating processes.With the old model, the manufacturer, the distributor, and the retailer each attempts to optimize its own operations. The new way, through reengineering, should enable them to optimally source raw materials, convert to finished goods, distribute to trade customers, and sell to consumers in ways that minimize total system cost. By ascertain who can do each process in the chain most efficiently, it can let that process get through with(p) only once, at the most efficient site. That way it can eliminate waste from the system.REENGINEERING military rankThe success needs the following. The Analysis, Design and Prototype yielded the pain areas and laid out the broad road maps. But implementation needs the following to be successful Senio r management must drive reengineering initiatives with a well-articulated vision that is appropriate for the situation.IT is an undervalued asset that can be tapped through reengineering to transform a company from a make-and-sell-oriented enterprise to a sense-and-respond-oriented enterprise.Successful implementation of reengineering projects requires the intricacy and participation of the companys managers and employees. Consultants and outsourcing are important for various aspects of a reengineering project, but they are insufficient without the buy-in from managers and professionals in the organization.Business process can be silklike or reengineered, but to change the long-term economic picture, a break initiative needs to encompass the reevaluation of communication systems and the sharing of intellectual assets.The organization should have a clear target in mind, whether it is to incorporate a continuous improvement philosophy or a complete redesign of processes.AFTER EFFEC TS OF REENGINEERING EFFORTSDuring the last three years, the entire strategic means of the company has changed.Selling off the flour mills was an epochal event. It was a major cultural shock to many people inside and away the organization who thought of Pillsbury as a vertically-integrated flour manufacturing company.They have exhibit that they can become a consumer-based company that is prepared to get out of operations that do not add value.An integration of the entire value chain was the target driven by the customers leading to a pull based strategy. Information systems were to enhance the communication capabilities to incorporate fact based marketing.Major cultural change was seen with the relationship with the customers transforming from merely an arms length relationshipMajor improvements in expenses and profitability were expected rendering Pillsbury with the capabilities required in such competitive environment.CONCLUSIONThe problems initially faced by Pillsbury required a complete redesign of the processes and not merely a continuous improvement effort. Thus the decision taken by the management to extend the target to $300 million was a correct decision if a long term view was to be considered.The major changes that were to incorporated as a result of this BPR effort were necessary for Pills burry to have the necessary capabilities to compete in the highly fragmented and competitive market.The reengineering effort was well planned in various phases describing the various considerations of each phase starting with the development of a business case followed by its feasibleness analysis. The areas chosen for improvement wereCustomer Supply ChainBrand ManagementNew Product CommercializationThese areas provided peachy opportunity for integration of the entire value chain and to transform into a pull based value chain with the customer as the major driver.The efforts undertaken have led to great motivation amongst all the stakeholders and they believe that Pillsbury is not a laid back organization anymore. Their customers are enthusiastic about shifting from changing the way they do business together and are willing to endorse new relationships, such as service-based pricing.LEARNINGSThe importance of manufacturer-retailer relationship in this highly fragmented market.The difference in continuous improvement efforts and redesign of processesHow to approach a BPR problem in a systematic way demarcating the tasks to be done in a particular order in various phases.The importance of techniques like ABC Costing and the utilization of the revelations such techniques make