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Case Study – Operational Effectiveness Assessment – Managing Risk

By Roy McFarlane

The Client

  • Medium sized FMCG manufacturer

Constraints

  • Regulated industry
  • Long supply lead times
  • High raw material costs
  • High potential impact from consumer complaints

The Problem

The client’s product uses raw materials supplied from multiple countries and the assembled product is governed by strict UK Regulations and retailer standards.  Following a series of consumer complaints and the threat of a full product recall, the business had to re-evaluate its processes.

The systems had been set up by the founders and a Venture Capital buy out had brought in a sales focused team.

Raw material and supply chain inconsistencies were affecting production targets

Two of the Big Seven retail customers had put sales on hold and given the manufacturer an ultimatum of 3 months to “rectify its deficiencies” or be in breach of their supplier contract.

What they needed

Firstly, the client needed to understand what these “Deficiencies” were, in the eyes of their customer. They had recognised a critical clash between their (internal) values and their customer’s.

They needed to re-align their business focus with their customer’s expectations, to solve a £100 Million revenue problem in less than 3 months.

Customers had highlighted concerns based on previous non-conformances –

Quality Management, Business Systems, Reliability, Staff turnover and Supply Chain Management

They needed help finding the best place to start – and fast.

Choosing the Consultant

The client had quotations from Big Brand consultancies but was expected to have a plan for the consultancies to work from.  They wanted hands-on help, an outfit that could work with them to resolve the issues and build their team in multiple areas in parallel.

They needed a consultancy with decades of experience in manufacturing operations, quality systems and supply chains and that was committed to their business objectives.

The right outfit had to be capable of scaling quickly, cost-effectively and experientially with the project.

Operational Effectiveness Assessment

Operational Effectiveness Assessment – assessing the relationships between Systems, Processes and People through a cross-section of the business

Benchmarking “whole business” effectiveness – enables visual comparison of strategic improvement objectives and agile management of these.

The client wanted their raw material suppliers and supply chain partners to be incorporated.

An aim was to demonstrate that the business owners care and want long term success.

The Process

Buy-in from Board and Senior Management Team – full disclosure

Promote a solution-focused mind-set – action groups

Define critical to success elements – measurement & ownership

Audit Operational Effectiveness

Risk-Based intervention – define Good Enough

Agile implementation – make a start, improve, review, adjust, control, and move on

Audit Results

The assessment highlighted that a lot was being done right across most departments but focused effort on four performance areas with high impact – low-cost ratings.

  1. Remove the blame culture – See It – Own It – Fix It
  2. Implement an integrated Business Intelligence System
  3. Integrate site Quality Management functions with Supplier Quality Validation
  4. Establish Continuous Improvement practices

Business Benefits

Venture Capitalist investors had sufficient confidence to invest further in improvements.

Material supply issues were corrected at the source

Supply chain partnerships were re-established on a “Fair Fee” basis

Better interaction, improved team interaction and reduced staff turnover

Improved productivity and profitability

Improved retail customer confidence – quicker resumption of business

Key statement

“This process uncovered critical operational issues that were hidden behind well-prepared balance sheets, we [Venture Capital Group] now have a healthier business overall.”

Roy McFarlane | UK Business Advisors (ukba.co.uk)

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