Step-by-Step TVO Implementation (CS188)
Transforming the supply chain into a competitive weapon for a global chemicals company in a complex post-merger environment.
This story is for CEOs who:
- Transform their operations, procurement and logistics functions to improve competitiveness and enable growth
- Improve performance and enhance cross-functional alignment in a highly unionized and complex high-tech environment
- Extract more value from the supplier environment regarding their product portfolio
This major manufacturer of commodity chemicals had recently combined the business of two companies into one multibillion-dollar global organization. Company executives needed to rapidly capture value to deliver the synergy targets committed to investors. Maine Pointe was called in to help break down functional silos and barriers and drive value across multiple business units. This was the first step of the client’s Total Value Optimization™ journey.
The newly merged company was a combination of two very different cultures and supporting operating models. Individually, each company’s maturity across procurement, logistics and operations functions was rated at level 2 on the 5-level Total Value Optimization™ (TVO) maturity curves. The merger of the two entities, while immediately accretive from a financial perspective, had reduced the maturity levels of each of the functions to well below level 2. This drop was caused by a lack of cross-functional and cross-business integration and
Phase 1 – Optimized truck fleet and rail operations
Maine Pointe had previously worked with the acquiring company to drive logistics improvements focused on optimizing truck fleet and rail operations. This resulted in $12M in savings while improving product time-to-market. Our track record for driving measurable results and sustainable change was key to the company’s choice of Maine Pointe as their partner in the next, more challenging, postmerger phase of its transformation journey.
Phase 2 - Synergy across procurement & logistics functions
Following an in-depth TVO analysis, the first phase of the post-merger journey focused on helping drive synergy savings and benefits across procurement and logistics functions. This meant consolidating thousands of incumbent vendors into a very limited number of strategic and accountable partners across all sites. This required the creation of a centralized procurement function that partnered with parts and logistics suppliers to drive savings, operational efficiencies and strategic value across the business.
While developing the sustainability plan, it became clear there were additional areas that needed to be addressed to sustain momentum and accelerate the maturation of the company’s buy-make-move-fulfill supply chain capabilities. This led to the next phase of the engagement which focused on driving further cross-functional integration to include operations.
Phase 3 – Driving value across procurement, logistics and operations
In this phase, the goal was to further build out and enhance the maturity of the company’s procurement and logistics capabilities, leveraging innovative supply partnerships. This helped catalyze the transformation of operations, particularly in the areas of maintenance and reliability. While these two additional engagements had different executive sponsors, Maine Pointe maintained cross-functional governance through integrated monthly TVO progress meetings.
Having established center-led functions and sound practices across procurement, logistics and operations, Maine Pointe outlined the next phase of the company’s pragmatic TVO journey as it continues to transform its supply chain into a competitive weapon.
The ResultsOur team worked shoulder-to-shoulder with executive leadership and functional managers to drive cultural change and alignment that will be sustained over time. Along with over $112M of benefits realized as part of the transformation to date, the following results were delivered at each stage of the journey:
- Optimized truck fleet and rail operations
- Improved time-to-market
- Reduced logistics costs by 5%
- Saved $12M, with an additional $20M in additional savings identified over the following 12 months
- Aligned leadership and teams behind a common goal
- Delivered $65M in savings across procurement and logistics
- Created long-term supply relationships
- Consolidated multiple vendors and processes
- Established the operating model required to sustain logistics and procurement savings
- Aligned and infused sound practices across procurement, logistics and operations
- Established the foundations for a culture of innovation to drive Total Value Optimization™
- Delivered over $35M in further cost savings across procurement, logistics and operations
Lessons learned for other executives
- Having a clear and aspirational vision is foundational to sustainable success
- A TVO journey can start at any point in your value chain, provided leadership is committed to developing differentiating capabilities
- As a company moves up the TVO Pyramid™, cross-functional integration is more critical and yields exponentially higher benefits
- It is possible to change the perspectives of challenging people with experienced personnel, capable of driving change