Operational Turnaround for a Large Chain of Bakeries

THE CLIENT

A large chain of bakeries that exports baked goods to several countries across Europe and the Middle East.

With a vast network of production facilities, the client faced challenges in managing overhead costs, particularly in facility maintenance, labor market expenses, and compliance with food and health safety regulations.

THE CHALLENGE

Our Enterprise Health Check assessment revealed High Overhead Costs across the cost control system due to:

High facility maintenance costs: £2 million annually
Expensive labor market: £5 million annually
High cost of compliance with food and health safety regulations: £1 million in fines and penalties

The total estimated monetary losses or unnecessary costs that could have been prevented amounted to £8 million annually.

ASSESSMENT

Lead Measures

Facility Maintenance:
- Preventive maintenance schedule: 60% adherence
- Facility condition assessment: 20 facilities assessed
- Energy efficiency initiatives: 5 projects implemented
Labor Market:
- Labor market analysis: Conducted in 10 regions
- Wage benchmarking: Compared with 5 competitors
- Employee retention initiatives: 3 programs launched
Regulatory Compliance:
- Compliance training: 500 employees trained
- Audit preparation: 15 audits prepared
- Risk assessment: 10 risks identified

Lag Measures

Maintenance Costs:
- Maintenance costs as a percentage of replacement asset value: 10%
- Downtime due to maintenance: 500 hours
- Energy costs: £500,000
Labor Costs:
- Labor cost per unit: £10
- Wage inflation: 5%
- Employee turnover rate: 20%
Compliance Costs:
- Compliance costs: £1 million
- Number of non-compliance issues: 30
- Fines and penalties: £500,000

SOLUTIONS

Facility Maintenance

Implement a robust preventive maintenance schedule
Conduct regular facility condition assessments
Invest in energy efficiency initiatives

Labour Market

Conduct comprehensive labor market analysis
Implement competitive wage benchmarking
Launch targeted employee retention initiatives.

Regulatory Compliance

Provide ongoing compliance training
Prepare thoroughly for audits
Conduct regular risk assessments

RESULTS

Facility Maintenance:
- Reduction in maintenance costs by 20%
- Decrease in downtime by 30%
- Savings in energy costs by £200,000
Labor Market:
- Reduction in labor cost per unit by 15%
- Control of wage inflation to 3%
- Decrease in employee turnover rate to 10%
Regulatory Compliance:
- Reduction in compliance costs by 25%
- Elimination of non-compliance issues
- Avoidance of fines and penalties

CONCLUSION

The overall savings amounted to £3 million annually, significantly reducing the overhead costs and enhancing the profitability of the bakery chain. The strategic approach to cost control not only improved the financial performance but also strengthened the operational efficiency and compliance posture of the company.

Note: The above values are estimated variables and are subject to change depending on the scope, volume, complexity, and unique circumstances of each client.