Challenge

A leading Australian beverage manufacturer was facing challenges meeting additional demand over seasonal summer peaks, causing DIFOT to decline and tension with strategic customers. The business was looking to understand how they could:

• Streamline the product portfolio to eliminate unnecessary complexity, while offering an enhanced understanding of profitability
• Create a more transparent and nimble supply chain capable of meeting evolving customer needs, while unlocking short term capacity to capture demand for products
• Deliver a tactical uplift in capacity and improve commercial profitability (specifically gross profit) – while aligning against updated strategies for new product development
• Understand the relationship and the trade off between variety of product and supply chain efficiency (e.g. due to changeover time)

Approach

We supported in building a product profitability model which allocated key drivers of cost across customer, make and sales location. We approached our delivery in three phases:

1. Data cleansing and collection

Our team engaged client stakeholders across finance, supply chain, sales and procurement to build a cross functional understanding of input data to adjust raw data for business context, including:

• Sales data
• Bill of materials
• Delivery rate cards and 3PL rates
• Commercial overheads, allocated to product and site
• Production run rates

2. Cost allocation and refinement

Reviewed and agreed on accurate cost allocation methods to build-in dynamic rules that changed raw data into structured outputs including:

• Standard direct costs
• Purchase price variances and commodity volatility
• Distribution and warehousing
• Commercial indirects

3. Dashboard build and publishing

Dashboard published onto client environment, set up with permissions based on sensitivity of data

Impact

5%

Annualised uplift in gross profit

75%

Loss-making SKUs deleted, maximizing volume of high profit SKUs

2,000

Annualised hours of production capacity opened via reduction of changeovers with a simplified portfolio

Improved customer service

Significant reduction in failed orders to customers, improving service standards