The Situation

The client was a food manufacturer based in Western Europe. They were a third generation, family owned business, that was very interested in expansion. With this focus they acquired a logistics company to scale up their capability to deliver to a larger geography.

The Business Need

One of the reasons for acquisition of the logistics company, was to cater to a larger geography. The other reason was to respond to changes in demand in a more flexible manner. After the acquisition of the logistics company, the parent manufacturing company, found that the market changes were more pronounced and therefore could not keep up with the rapid changes in demand. The demand changes caused more issues within the parent company than before the acquisition of the logistics company.

Analysis

The client mentioned that the systems of the logistics company were integrated to the parent company. However, a closer look at how the parent company had envisaged the workflow to serve the market was significantly different from what the systems in the logistics company was set up to do. The logistics company had a variety of controls in place to understand the flow of materials through its systems but there was no need for the company to understand actual market demand. Market demand and in turn, the rate of flow of materials through its systems was always determined by an external firm, such as the parent company. 

The demand measurement was added to the logistics firm and the parent company expected demand management to be met by the newly acquired logistics firm.

The Solution

The solution was a compromise between the decision making in the logistics company and the decision making in the manufacturing company. ACPL decided to segregate certain functions of demand management to the logistics firm and certain functions to the parent manufacturing firm. Based on this segregation the processes had to be slightly changed, and there were significant changes to the IT systems.

Some of the functions were automated and the upper and lower bounds of operations were set using historical data from the both the firms. This automation helped remove the pressure points between the two IT systems that had caused numerous errors and issues during rapid demand changes.

Results

The alignment of the two IT systems was the key to success for this client. Throughout the engagement, there were significant ups and downs because of the disparate systems of the two firms. The data flow could only be corrected once the workflow of how the materials moved through both the firms were understood, and how the decisions were supposed to be made were understood. Both the IT systems had to work as a cohesive system along with all the people who were responsible to ensure that demand changes were being catered to. Though our engagement took nearly 18 months, the end result was quite satisfying.