How a Food Manufacturer Unlocked $7 Million in Margin Improvement and 100% SKU-Level Visibility Into Product Portfolio

Challenge

Despite strong sales, a PE-backed food processing and manufacturing company lacked product-level margin visibility.

The company wasn’t allocating labor to overhead or individual SKUs, and its standard costing methodology was disconnected from actual production processes. Without the ability to identify loss-making SKUs or effectively negotiate pricing, margin leakage was significant and pervasive. Poor, misinformed decisions on pricing and customer accounts were frequently made.

With fragmented procurement spend amplifying issues further, a comprehensive transformation was needed.

How We Helped

CrossCountry Consulting partnered with key financial and production stakeholders to conduct operational time studies, model cost and pricing, and optimize the procurement function. Structured in four phases, this work included:

Phase 1: Build Accurate Cost Standards 

• Line studies and router analysis: 
  • Conducted physical time studies on production lines to measure actual labor, machine hours, and production run throughput for each manufacturing process. 
  • Aggregated common line-level production issues driving inefficient processes and sub-optimal throughput. 
• Revised standards in ERP: 
  • Updated routers to reflect granular steps and accurate cycle times. 
  • Recalculated direct labor, variable overhead, and fixed overhead rates by defining cost pools and applying them to actual cost drivers. 
  • Arrived at improved labor and overhead rates to be loaded in the system, developed by analyzing cost pools for utilities and maintenance, allocated based on true drivers rather than flat percentages. 

Phase 2: Enable Operational Accountability 

•  ‘True North’ manufacturing standards: 
  • Developed and finalized attainable production standards for all SKUs and production processes. 
  • Ensured alignment on achievable production efficiency targets and manufacturing standards. 
  • Enabled alignment on realistic production standards to serve as the go-forward efficiency benchmark. 
• Downtime tracking: 
  • Implemented standardized downtime codes (e.g., “Changeover Delay,” “Material Shortage”) to capture root causes of variances. 
  • Enabled go-forward tracking and monitoring of downtime codes, targeted at reducing key inefficiencies common across production processes.
  • Drove accountability through consistent monitoring of downtime codes driving low production yields. 

Phase 3: Deliver Insights and Action Plans 

• SKU-level margin profiles: 
  • Built dashboards showing margin by SKU, customer, and production process. 
  • Provided visibility into the core drivers of individual SKU profitability, highlighting which lever(s) the company should pull to enhance margin (i.e., production process improvement, pricing and customer account negotiations, or SKU rationalization consideration.) 
• Procurement optimization: 
  • Reviewed vendor spend to uncover rebate opportunities and improved payment terms. 

Phase 4: Tactical Roadmap to Harvest Margin Opportunities 

• Prioritized initiative sequencing: 
  • Developed a clear roadmap to capture identified margin opportunities, sequencing initiatives across manufacturing efficiency, pricing actions, SKU rationalization, and procurement improvements to minimize disruption and maximize impact. 
• Ownership and accountability framework: 
  • Assigned initiative owners within operations, finance, and procurement, with defined KPIs and timelines to ensure execution discipline and measurable progress. 
• Implementation support and monitoring: 
  • Delivered tools and dashboards for ongoing tracking of margin improvement initiatives, enabling leadership to monitor performance against targets and adjust tactics as needed. 
  • Deployed an embedded resource to provide on-the-ground bandwidth as a project manager and technical partner to the CFO, which facilitated better management/board reporting and FP&A efficiencies.

Results

The newfound expertise and capabilities generated significant value potential in the form of:

• $7 million in total margin improvement opportunities, including:
  • $2.5 million: Manufacturing process opportunities (True North to current production costs).
  • $2.1 million: Customer and product pricing opportunities (through analysis of SKU-level pricing differences between customer accounts).
  • $1.5 million: Negative margin SKUs for rationalization consideration.  
  • $1.1 million: Improved vendor terms around rebates, alternative vendors, and enhanced purchasing patterns. 
• 100% product portfolio SKU visibility, which enabled enhanced operational decision-making, improved accountability, and strategic customer negotiations.

As the company continues to optimize its finance, operational, and procurement functions, it now has the tools and transformation playbook to achieve critical business and sponsor goals.