Pillsbury: Customer

Driven Reengineering
 Company
Founded in 1869 as a flour milling firm
in Minnesota.
Operations soon extended into
branded bakery goods products.
Grand Metropolitan (GrandMet), a
diversified UK-based consumer goods
and retailing corporation , purchased
The Pillsbury Company for $5.8 billion.
 Pillsbury Capabilities
The Efficient Consumer Response (ECR)
effort was a multi-industry project,
involving food processors, manufacturers,
distributors, wholesalers, brokers, and
retailers.
ECR's goals were to reduce costs and
drive inventory levels down throughout
the system, while simultaneously
enhancing capabilities to meet the needs
of diverse consumer market segments.
 Activity-Based Costing
Launched an activity-based cost (ABC)
initiative to examine the group's high cost
structure.
The traditional cost system in these plants
had been reporting a constant labor and
overhead cost per case across all the cake
mixes produced in a plant.
The ABC analysis indicated a more than
3:1 cost variation in the various cake
mixes.
 Launching the Reengineering
Program
The proposal identified a process
which would complement Pillsbury's
existing strategic plan to achieve top
quartile financial performance
amongst its strategic peers.
 Reengineering: Phase I
Three core business processes that
offered targets for improvement:
Customer Supply Chain
Brand Management
New Product Commercialization
 The Customer Supply Chain since
this process accounted for more than
85% of operating expenses.
The Customer Supply Chain (CSC)
was decomposed into three sub-
processes:
Total Customer Development.
Fast Flow Demand Replenishment .
Value Based Sourcing and Supply.
Total Customer
Development
Fast Flow Demand
Replenishment
 Value Based Sourcing and
Supply
The system encompassed:
1200+ different material specifications
(recently reduced from more than1900)
260 vendors (recently reduced from more
than 400)
Complex recipes and ingredient
specifications
Arm's-length, price-sensitive relationships
with vendors; virtually notechnology or
information integration with vendors
 Reengineering: Phase II
Launched in January 1994
Business case developed in Phase I was
feasible and realistic.
Re-engineering the customer supply chain
could provide upwards of $100 million in
benefits.
About half would come from working more
closely with customers and other from
managing Pillsbury's entire supply chain.
 Other companies cut people first
and then attempt to re-design their
processes.
Pillsbury will start will clean slate
by understanding its existing
process and then re-design.
To achieve $300 million
improvements, approach
organization with open mind.