Operational Restructuring at HBC Company
A $2 billion manufacturer of cosmetics, fragrance, and beauty care products had global brand recognition and customer relationships across mass merchandisers, department stores, drug store chains, specialty stores, and professional beauty care channels. However, following its acquisition by an industrial financier, the company found itself struggling to maintain its market position.
Following unsuccessful attempts by the existing management team to refocus the companys operations and regain its lost market share, the chairman replaced senior leadership with the goal of reengineering operations, repositioning the brand, regaining leading market share status, and taking the company public within 12–18 months. As part of this fast–paced initiative, Supply Chain Edge was engaged to transform the company's end–to–end supply chain operations in North America, Europe and Latin America.
We used a five step process to respond quickly to these critical objectives. First, we ascertained the current and future viability of the company's supply chain. Next, our team determined whether adequate management resources were available to implement the chairman's turnaround plan. Our third action was to take emergency steps to stabilize customer service and operating costs, including the elimination of non–performing resources that might interfere with the turnaround. We also ensured the protection of the brand and customer confidence during the restructuring by establishing processes to share detailed operating information with customers, as well as maintain the continuity of their shipments. Next, we worked with the client to restructure the supply chain to be consistent with the strategic plan, a process that included significant changes to the company's management team. Finally, we positioned the supply chain to deliver year–over–year financial productivity and process improvement.
These initiatives dramatically improved the company's supply chain performance. For example, orders filled complete increased from 86% to 97%, internal order lead time shrank from 2.4 days to 1.2 days, end–to–end customer lead time went from 4.3 days to 2.1 days, and customer on–time delivery improved from 91% to 98%. Furthermore, supply chain unit cost — measured as a percentage of gross sales — was reduced from 6.93% to 2.43%. While these immediate rewards are indeed impressive, the longer term results are even more so: The company successfully achieved market share leadership and public ownership status within 24 months of the turnaround initiative.
