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FC Company Integrated Business Planning (IBP) journey
30 January 2019
By Liam Harrington and Anne Marie Kilkenny, Associates at Oliver Wight
FC Company background information
The FC Company is a global business based in Rotterdam. It specialises in premium baking ingredients. Turnover is €6bn. The business has a matrix structure. There are 3 divisions: Consumer/Retail; Trade (HoReCa) and Industrial (e.g. luxury cookies, cakes, pizza). Markets are regional: Europe West & South; Nordics; Central and Eastern Europe; North America; Central and South America; Asia Pacific; Middle East & Africa. A single Global Supply Chain organisation serves all Divisions and Regions.
The FC Leadership Team:
Sara van den Berg
EVP Global Development
EVP Global Supply Chain
Global IBP Lead
Rachel Van den Bosch
President Trade Division
President Industrial Division
Macro Market Information
The global bakery and cereals market was valued at $477bn in 2015 with expectations for growth to $540bn by 2020. Western Europe is the largest region by value, representing ca 30% of the Global market. China is seen as a key growth market in all sectors. The Global market is highly fragmented with many different brands. Distribution is still primarily through the Supermarket channel, which accounted for 41% of sales in 2015. Online shopping has of course grown significantly since then, but in Bakery and Cereals online is still mostly driven by the Supermarket giants.
So here we are at the end of a super two days learning about, discussing and debating Integrated Business Planning with the Executive Leadership team of FC. There were some tough issues to get through – and a couple of real pain points! – but the level of excitement and commitment at the end is fantastic.
The Exec piece which we’re just finishing has been truly worthwhile because of the enthusiasm we’re now seeing from both the Corporate Execs and the Business Unit Presidents.
For the two of us it was quite exhausting and at times tense. Thankfully some of the people related to Anne Marie and some to Liam, which allowed us to do some managing of attitudes during the breaks. Sara (CEO), was terrific in leading, without dictating.
Following the Exec workshop all are generally excited about the change. Looking at how the workshop has gone, it was great that the leadership team really drove the session, and the belief that this is really going to happen. Every time an issue came up, they asked “how are we going to solve this”? We have to solve it if we’re going to move forward – and we haveto move forward. That was their attitude and that shaped the entire session. It took the whole two days to really get that across.
It is clear that some of the leadership team are concerned for themselves and how they will manage in the new environment, some are driving forward without full understanding. All appeared to buy the vision that IBP will drive growth and cohesion in the world-wide business.
That ownership we’re now seeing is exciting for us. They say a 747 can glide for 100 miles if the engines cut out, but you have to get up high enough for that to happen (35 – 40, 000 feet in case you ever need to know!). We know the FC engines will cut out several times over the course of their journey, so we need to get them high enough to maintain momentum when this happens. This is another reason why we push for the two days - on the rare occasions we have done 1-day sessions we have always regretted it.
The two days we have just spent here is a story in itself, but I’m reflecting that we have already been on quite a journey just to get to this point. The interesting thing is how long it took us to get here.
Frank Wouters, EVP Global Supply Chain, initially approached us due to issues with poor demand forecasting and supply alignment. The market had been declining for several years due to changing consumer trends - for example the popularity of the 5:2, Keto and other low carb diets, and the increase in veganism. Additionally, increased consumer awareness and concern regarding food intolerances, particularly gluten, caused some markets to shrink further. The Supply Chain had been struggling to stay ahead of changing demand requirements and was caught out with overcapacity in some sites and the wrong set up for some of the emerging demand streams.
The first stage of work we conducted with the company was a diagnostic. One of the key outcomes of this activity was that we identified significant opportunities for the business in the form of segmentation and improved portfolio management. An extract from the diagnostic findings:
‘There is currently insufficient strategic ownership for the portfolio. Product and packaging changes are ad hoc and short term in their outlook. Portfolio management needs to be driven by the strategy and much more externally focused. The existing older base needs to be streamlined/rationalised and there should be more focus on innovation around the newer opportunities, recognising consumers’ increased focus on nutrition and health: gluten-free, dairy free, vegan, wellness, reduced sugar and higher protein products for sports nutrition, in addition to new baking ingredients and mixes driven by the popularity of baking from scratch.’ We also uncovered significant opportunities around pricing. There is a huge opportunity for price differentiation and particularly premium pricing for new products in these new categories.
The executive team were initially sceptical about the findings as they were stuck in a paradigm that S&OP/IBP is a purely a supply chain process. We needed several executive briefings and one-to-one sessions to build a better understanding of what the process can bring for this business. The Executive IBP workshop was an opportunity to build further understanding and alignment across the leadership team about what the Integrated Business Planning process can and should do, both generally and specifically for their organisation. This is crucial in setting out priorities and in identifying the size of the prize.
Just persuading the Exec that two days was necessary and that they could and should free up their time was a challenge in itself. It took time! From agreeing the programme and signing the Purchase Order, getting to the point where the FC Team felt ready and we in Oliver Wight felt ready took months. This was mostly due to us believing they weren’t ready. They wanted to jump in and start the design straightaway. We said no. The Exec wouldn’t understand what was to happen, the level of change required, and they would want to put the wrong people into the design process – as it proved! The President of the Consumer Division is now excited to be leading one of the design teams, but she would not have done that were it not for the Exec Education. There was a lot of debate about who would participate in the IBP programme. A change like this is much broader and deeper than just ‘people who have the time’. It was our understanding and knowledge (coming from the diagnostic) of who needed to be in there and also helping the Exec see why they needed to be in there. Initially they were clearly thinking of delegating the whole thing to the next level down, or even the level below that, rather than believing ‘this is my accountability, so I need to lead it and I need education to understand what “it” is’.
One of the issues we often see is the people looking to run a project, project leaders etc. compromise the Business Leaders and second guess them. They say, “the Exec won’t have the time to get involved with this” and therefore don’t even ask the question. We say “have you asked them” “well I know they won’t” we say “not acceptable – have you asked them? What have you told them?”. They tend to second guess the Exec, assuming they won’t want to be involved. So, it’s often this group of people who push back, not the Leadership team. Our experience is that the Leadership Team will generally do whatever is asked of them as long as you explain why it’s necessary. So, in FC Company, we did a series of Exec Briefings after we won the contract in order for the Leadership Team to understand why they needed to give two days of their time. They eventually agreed and it has paid off in such a great way - not only here in the Exec workshop but also in the messages they are giving to their organisation about why IBP is mission critical.
The briefings were supported by the outcomes of the diagnostics we had conducted across the business. The results of the diagnostic helped the Exec see the value and get to the understanding that this change will not happen by itself - they need to be directly involved to make it successful and sustainable.
The Exec workshop flushed out the real issues for (and between!) the Exec Team and Divisional Presidents. This means when we get into the Business, we can understand the differences in perspective between the centre and the individual Divisions and/or Supply Chain nodes.
At the conclusion of the workshop we have agreement that Integrated Business Planning will be the way FC runs the business in the future. We have agreement on the initial framework for the process and who will own each of the elements. And we have agreement to move ahead, following the Oliver Wight Proven Path methodology. A good beginning, but it really is just the beginning….