Reducing production costs by £149,000+ Business Performance Management Case Study

THE SITUATION

This food production business produced their fresh products from several kitchens located across central London. The business had not analysed its production workflows, capacity or cost base from a strategical viewpoint.

The business needed to reduce costs were possible, without impacting the overall production capability.

The business was running 4 separate kitchens to make products to meet customer demand.

THE PURPOSE OF THE PROJECT

To reduce production costs without impacting overall capacity or quality of output.

THE PROJECT

The work that we undertook with the client team included:

Reviewing ingredient their purchasing practices. i.e. do they small amounts often, or large amounts less frequently
Analysed and investigate the production workflows to understand the bottlenecks
Build modelling to understand capacity and production effectiveness
Changed production batch sizes and purchasing patterns to minimise bottlenecks
Modleled total capacity, including peak demand towards Christmas
Mothballed one kitchen (we were not able to close as the lease included a store which we wanted to keep)
Closed one kitchen
Staff were re-deployed to other kitchens, with natural staff attrition generating savings over several months. This step helped the operational teams reduce disruption.

During this project, it became apparent that the business was running with excess production capacity and the additional costs that this incurred.

THE OUTCOMES

The changes to purchasing and production patterns increased capacity as bottle necks were minimised. This allowed us to close two kitchens (out of four) and still maintain excess capacity compared with sales demand.

The reduction in headcount, rental, and kitchen running costs was over £149,000 per year.