Operational strategy characterization for global food manufacturer

Background

• Food supplier that produces in magnitude of hundreds of millions of shekels a year
• The company has several target markets, some close to its full potential and some have growth potential of tens of percent
• The company has production facilities in Europe and Israel
• There is a significant variance between basket of products being sold in different markets and even in different countries, creating high complexity at all levels of the supply chain (Sourcing of raw materials, production lines, quality standards, shipping channels, packaging)

Challenges
Defining operational strategy that answers questions such as what, where and how to produce to each target market? All while minimizing fluent costs and investment costs (Capex), and addressing production capacity and risks minimizing
How Tefen Helped

• Definition of a product characteristics set and division of all serial numbers (few hundreds) into categories according to these characteristics
• Demand analysis for each market by category
• Alternative production costs analysis at each production facility by category, with reference to local constrains
• Analysis of required investment costs to establish production facilities and to transfer production lines
• Sensitivity analysis related to demand and exchange rates.
• Definition of 12 operational alternatives and building expected P & L for each alternative
• Definition of four main alternatives and a thorough performance analysis including risk management and sensitivity analysis

Results:
Tefen`s work helped the company decide avoiding construction of additional production line which was proved as non-profitable and high risk potential.

Tefen recommended transferring the production line in order to save 10% of direct cost - recommendation which was accepted and implemented.