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Operational Restructuring at HBC Company

  • A cosmetics, fragrance, and beauty care products company launched an initiative to reengineer its operations, reposition its brand, regain lost market share, and ultimately go public. Supply Chain Edge was hired to transform the company’s supply chain as part of this initiative.

  • The Supply Chain Edge team assessed the viability of the company's supply chain and the depth of its management resources, stabilized customer service and operating costs, created processes to protect customer relationships, and restructured the supply chain to generate annual financial productivity and process improvements.

  • The company subsequently increased orders filled complete by 13 percent, shrunk internal order lead time by 50 percent, cut customer lead time by 51 percent, improved on-time delivery by 8 percent, and reduced supply chain unit cost as a percentage of gross sales by 65 percent. In addition, the company achieved market share leadership and public ownership status within its desired timeframe.

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 identified risks to its long-term market position, such as lost market share.

Following attempts to refocus the company’s operations and regain its lost market share, the chairman brought in a new leadership team to reengineer operations, reposition the brand, regain leading market share status, and take the company public within 12 to 18 months. As part of this fast-paced initiative, Supply Chain Edge was brought in to help transform the company's end-to-end supply chain operations in North America, Europe and Latin America.

Supply Chain Edge used a five-step process to respond quickly to these critical objectives. First, Supply Chain Edge ascertained the current and future viability of the company's supply chain. Next, the team determined whether adequate management resources were available to implement the chairman's turnaround plan. The 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. Supply Chain Edge 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, Supply Chain Edge 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, Supply Chain Edge positioned the supply chain to deliver year-over-year financial productivity and process improvements.

These initiatives dramatically improved the company's supply chain performance. For example, orders filled complete increased from 86 percent to 97 percent, internal order lead time shrank from 2.4 days to 1.2 days, end-to-end customer lead time dropped from 4.3 days to 2.1 days, and customer on-time delivery improved from 91 percent to 98 percent. Furthermore, supply chain unit cost—measured as a percentage of gross sales—was reduced from 6.93 percent to 2.43 percent. 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.

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