Provides Opinion & Testimony In:
food industry, supply chain management, consumer products distribution, cost analysis, manufacturing, distribution, food, beverage, wholesale, fraudulent transfers, bankrupt, sales commisions, pricing research, bottled water, mineral water, tea, soft drink, frozen potato processor, cash flow, strategic operations, customers, sales, data, inventory reduction program, production equipment capacity, safety stock levels, stock keeping unit, forecast accuracy systems, consultation, inbound logistics savings, sku rationalization, private fleet operations assessment, home grocery delivery service, Aluminum cans, Steel cans, Glass bottles, Metallic foil containers, Labels, Packaging materials, confections, logistics
Expert Witness No. 3788
Expert 3788, a founding Principal of a Management Consultants, is a specialist in supply chain management and consumer products distribution strategies and cost analysis. He has seven years food industry, manufacturing and distribution management experience and twenty-five years management consulting experience. Expert 3788 has conducted more than two hundred thirty general management consulting engagements for manufacturing and distribution clients, including many foodservice and restaurant chain companies that distribute food, beverage, and non-food items.
The focus of most of these engagements has been related to distribution cost analysis, cost reduction programs, and supply chain information systems. He has conducted nine litigation support and expert witness engagements for law firms.
Expert 3788 positions in industry were as a: spare parts logistics analyst for Ford Motor Company; operations planning & analysis analyst in the Corporate Controllerâ€™s office for the Food Machinery & Chemical Company (FMC Corp.); division general manager with Collins Foods International, a chain Foodservice Wholesaler, with responsibility for sales, customer service, traffic, delivery fleet, frozen, refrigerated, dry, and equipment warehousing, purchasing and information systems requirements. Expert 3788 began his consulting career as A. T. Kearneyâ€™s youngest ever associate in their San Francisco office, working on operations improvement programs with manufacturers and distributors. At Coopers & Lybrand (now PWC/IBM), he was the manager of the materials management consulting services group in Los Angeles, responsible for materials requirements planning (MRP) systems and inventory reduction programs.
Some of the expert witness and litigation support consulting assignments he has conducted include:
- Fraudulent transfer and negligence in due diligence for the failed (bankrupt) acquisition integration and consolidation of two large (multi-billion dollar) foodservice wholesalers by another. Focused on re-estimating synergistic distribution cost and operational benefits in warehousing and re-estimating restructuring costs and comparing these estimates to the defendants (managementâ€™s) estimates. Prepared background papers on the industry for the plaintiffâ€™s attorneys and other forensic accounting experts.
- Determining the supply chain warehousing, freight, and inventory value of lost soapand detergent products in an insurance benefits case 3PL Public warehouse (wholesale channel of distribution) suit of a large food processor of foodservice items, over warehouse pricing practices
- Vendor suit of a customer in connection of the issues of over-buying and excessive payment of sales commissions, contracting of warehouse space for excess inventories
- Minority Shareholder class action suit of a board of directors for fraudulent claims of distribution synergy and post-merger efficiencies. A chain of auto parts stores and two auto parts wholesalers were merged into a single entity, with hope of achieving distribution synergy. Since the entities were geographically diverse, served different market segments, and had separate product lines, it was shown that the merger did not achieve synergies.
- Warehouse expert witness personal injury case, where a customer of a grocery warehouse store tripped over a pallet. Knowledge of the industry and warehouse operating practices were key to the case being settled out of court through mitigation.
- Two computer tape drive manufacturers suit over pricing practices Some of the beverage and related companies consulting assignments he has conducted include:
- Was an expert witness in a bankruptcy case involving the merger of food and beverage distributors and restaurant chains For bottled water, mineral water, tea, and new age fruit juice bottler, facilitated a strategic plan focusing on achieving competitive advantage, providing exceptional customer service, enabling use of key and pacing technologies, and achieving the highest margins and lowest cost in the industry.
- For a series of dairy products manufacturers and milk producers, conducted DSD fleet cost reduction, fleet routing, fleet replacement, and fleet maintenance improvement programs
- Conducted a pricing research project for a large soft drink bottler
- For two large fruit juice bottlers and canners, conducted a series of operations management strategy and process improvement projects, including warehouse management systems and inventory reduction programs
- Consolidated five warehouses for a wine and spirits wholesaler into an automatedand centralized distribution facility. Realigned delivery routes to achieve fleet vehicle and driver reductions.
- Determined the number, location, size and territories of warehouses for a bottled IV solution processor servicing hospitals and clinics on a nationwide basis For a spare parts supplier to the largest fast food chain, conducted a national distribution study of it warehouse network locations, considering relocation and realignment of warehouse territories and inventory deployment. Identified $300,000 operating savings in territory realignment
- For a 200 store supermarket chain, relocated its Southern California distribution center to Commerce from Vernon, after considering Industry, Inland Empire, and a 2nd DC in San Diego
- A partial list of some of the other food and beverage processing, wholesaling, and retail chain client projects Expert 3788 has conducted are
- Conducted a series of assignments in the warehouse location, site selection, facility layout, private fleet operations and maintenance improvements, buying and inventory management, and reorganization studies for a cash & carry wholesale chain
- Conducted a distribution pricing benchmarking study for two large fast food and coffee/dinner house chains, to determine self distribution and franchisee prices Developed a competitive analysis profile for a frozen entrÃ©e manufacturer, which helped the new brand take 15 share points away from competitors
- Conducted a customer service survey for a frozen potato processor (foodservice products) identified needed improvements in order fill rate, on-time delivery, forecasting, production scheduling, inventory management, and traffic operations
- Facilitated a strategic plan for a new age beverage processing company which helped refocus product line planning priorities and achieved management consensus
- Designed a marketing expense control system for a major branded canned fruit processor, which was used to plan, budget, and track its $70 million in annual advertising and promotion expenditures
- Analyzed the financial feasibility of self-distribution versus wholesaler distribution for a 175-unit convenience store chain. Self-distribution showed a 20% ROI on distribution center investment versus wholesaler distribution
- Determined the lowest cost method to buy food, candy, tobacco, beer, wine, HBC, paper, and general merchandise items for a 400-unit drug store chain. Compared the cost of DSD, wholesaler, and self distribution through the chainâ€™s warehouse and identified $6 million in annual supply chain cost savings
- Specified and selected WMS and truck routing software for a number of frozen food and dairy products companies
- Reduced inventories and reorganized the buying department for a grocery products
- For a bulk and canned fruit juice processor, as part of an ERP systems (Datalogix) installation team, specified sales order processing systems and selected supply chainâ€œbolt-onâ€ software
- For a private label fruit juice processor, analyzed and specified inventory systems parameters for the companyâ€™s ingredients, supplies, and finished goods inventory management systems
- For a seafood canner, conducted a multi-plant and multi-warehouse facility location optimization study and a finished goods inventory reduction program using a distribution software model
Note: Expert 3788 has worked for clients operating in 27 different industries, and engagement summaries are available for these varied client engagements, most of which are focused on supply chain issues and opportunities. He has worked on 50 truck fleet operations improvement and cost reduction projects
Expert 3788 received a B.S. in engineering from the University of California at Berkeley and an M.S. in operations research from Stanford University and the Stanford Business School. He also was awarded a special â€œEngineerâ€ degree by Stanfordâ€™s Management Science & Engineering Department for his dissertation on the subject of â€œOptimal Short Term Financing Decisions under Uncertaintyâ€.
He is a Certified Management Consultant (CMC) and was President of the Institute of Management Consultants, Southern California Chapter. Expert 3788 also has been a member of the Planning Executives Institute (PEI), Association for Corporate Growth (ACG), Turnaround Management Association (TMA), American Production and Inventory Control Society (APICS), and the Council of Logistics Management (CLM), now the Council of Supply Chain Management Professionals (CSCMP).
Expert 3788 has written many articles and chapters in books.
Development and Implementation of Route Accounting System
We were asked by the largest bottler and distributor of bottled water (to homes and commercial sites) to help them develop and implement a computerized Route Accounting system. Before we started this project, the company only had a manual process, which was done by their route salesman (actually their delivery truck drivers). This process had a number of problems:
- Salesmen do their paperwork at the end of a hard day of lifting 5 gallon bottles and they were tired. The last thing they wanted to do was paperwork
- Bills were late to customers leading to poor cash-flow
- Bills often had mistakes causing poor customer service and frequent complaints
- Salesmen got exasperated with all of the paperwork leading to high employee turnover
- Routes frequently changed as new customers were added and it was difficult to
- keep route/customer information in-synch between the salesmen and the accounting department
- Interviewed key Sales and Accounting personnel and determined that new system needed to have minimal input from the salesmen, but still needed to be timely and accurate enough to satisfy the accountants and the customers
- Reviewed various data input technologies from OCR to 2-way EDI terminals
- Selected a 2-way EDI terminal that allowed for up-loaded transmission of what
- was delivered to each customers at the end of each day and down-loaded the route/customers information for the following day
- Developed and implemented a system that used this technology combined with
- creating a centralized billing process in the accounting department
- Bills were much more timely and accurate.
- Cash flow improved.
- Salesmen could focus on their job, i.e., making deliveries and selling new customers — not paperwork
- Salesmen turnover improved dramatically because the worst part of the job was eliminated
Strategic Operations Analysis
A large producer and distributor of soft drinks asked us to assist them in realigning their current distribution network. Three plants were supplying thirteen branch locations that delivered seventy million cases annually to 45,000 customers. Each branch had its own sales force, warehouse and delivery capabilities serving a defined geographic area.
The purpose of the project was to determine the least cost facility network, specifying the number, size, location, and type of each facility; issues to be considered included:
- Combined vs. separate sales and distribution territories
- Trade-offs between cost, service, and market penetration for numerous small facilities with fewer delivery vehicles compared to larger facilities with larger fleets
- Use of a shuttle and depot system as an alternative to the branch system
- Impact of market shifts over a ten-year period
The following approach was adopted:
- Historical data was assembled into groupings (geographic, product, average order size)
- Market forecasts for three years were obtained considering regional/local population estimates and consumption trends
- Facility data were developed considering productivity by shipment mode, indirect costs, and proceeds from closure
- Fleet data were established considering costs, loading/unloading rates, plus stem and cluster mileage and times
- A software package was selected and customized to address the quantitative aspects of the analysis
As a result of this analysis, operating practices were modified which produced annual savings exceeding 20%. A strategic plan was also adopted which indicated modifications to be made to the facility network over the next ten-year period. CGRâ€™s SITELINK supply chain network planning optimization model was developed from the models used in this client engagement. SITELINK has identified over one hundred million in operating savings for a series of clients. Much of these savings have been implemented and achieved.
Inventory Reduction Program
A leading grower cooperative had established a separate division to process fresh fruit into a variety of frozen and non-frozen canned and bottled beverages. Two developments had impacted finished goods inventory levels, namely, availability of foreign bulk frozen juice and growth in demand for juice products.
To increase market share, a customer service policy of 100% had been established within its private label market segment. This policy resulted in excessive inventories and attendant storage costs; in addition, inventory turnover goals were not being met.
We were asked to conduct an inventory analysis, evaluate alternative production and inventory management policies, and implement an improvement plan.
Policies evaluated were:
- Use of high forecast accuracy systems
- Use of variable service levels by stock-keeping-unit (SKU)
- Reduction in safety stock levels and reorder points
- Setting of vendor and item review points
- Reduction in production run sizes
- Increase in production run frequency (reduced lead time)
- Increase in production equipment capacity
A computerized inventory simulator (INV SIM) was used to test new inventory policies for a stratified item sample. The simulator recreated a year’s customer orders, replenishment actions, production schedules, and product distribution. The system reported inventory levels (turns), service levels, and total supply chain costs. Alternative scenarios were defined and the following policies identified for implementation:
- Minimize run size without violating service levels
- Reduce between-SKU production line downtime
- Set safety stock based on quantity fill rate service level
Inventory turnover more than doubled from 105 days of supply to 45 days of supply. Fill rate targets of 99%, 98%, and 95% were achieved for critical, standard, and low priority items, product lines, and customer segments.
Beverage bottling and canning company
Development of a Corporate Strategic Plan
A subsidiary of a multi-billion dollar beverage company asked us to assist in developing a plan to guide their activities over the next five years. In developing this plan, a phased approach was adopted.
In the first phase, a grocery products bottle and can label market profile was developed that reflected domestic label consumption. The characteristics of 17 major market segments were also defined, including an examination of major brands within each segment. This analysis provided:
- Identification of the firm’s strengths and weaknesses
- Specific market opportunities
- Identification of potential threats
The second phase consisted of an analysis of customers and competitors. Ten in-person and 25 telephone interviews were conducted with existing and potential customers. From these interviews, profiles were developed indicating competitive pricing and sales volumes. Perceptions of the company were also solicited and a composite picture developed reflecting the firm’s strengths and weaknesses.
Conclusions reached from this analysis were:
- The limited growth potential, weak margins, and overcapacity in existing core business indicated the need for diversification into other label application areas
- Alternative technological processing capability should be developed to allow expansion into alternative markets
- Access to additional business should be pursued through acquisition or business agreement with a printing firm serving complementary markets
- Opportunities were identified to significantly improve company profitability
- through programs to improve productivity, reduce waste, lower interest cost, and use alternative substrate materials
As a result of this project, a five-year strategic plan was formulated which the company followed, acted on, and fully implemented.
Grocery Products Company
Inbound Logistics Savings
A series of inbound freight cost reduction programs were initiated and implemented, including:
Aggressive bid and reallocation of carriers within lanes produced 10% reduction in transportation costs:
These reductions were delivered via three strategies
Rate Reductions: Optimal lane cost $/ton/ mile established via cost studies, producing target economics for negotiations, supplemented with dedicated carrier and competitive bidding for selected lanes
Modal Selection: Inventory carrying costs were weighed against longer transit times with intermodal. Some lanes provided significant overall cost reduction opportunities
Ltl Consolidations: Carrier management, shipping and order placement management allowing average inbound weights to approach full truck load limits
Distribution Network Consolidation: Inventory management was improved allowing working capital reductions of 20%, creating consolidation opportunities in distribution network, which reduced overall distribution costs 10%
Sku Rationalization: Total mapping of distribution chain and costs associated with each product movement showed many of these products were in fact losing money. In this case, some 70% of the SKU’s did only 15% of the volume. SKU’s were either discontinued or pooled into separate “slow moving” distribution channels (optimizing LTL consolidation, reducing inventory).
Benchmark Distribution Channels: Savings were not quantified over time with this practice – but individual market distribution costs were standardized and continually compared to a Gold Standard – lowest cost, highest service – operation. Best practice review teams from each location visited other sites and were required to initiate best practice initiatives across the total operation. Incentives were paid for achievement of “Best Practice” improvements
Dairy products and fluid milk producer
Private Fleet Operations Assessment
A major producer of dairy products retained us to evaluate the operational effectiveness of its private fleet. Included in our assessment were the following issues:
- Equipment and driver deployment
- Equipment type (tractor, trailer, etc.)
- Equipment and driver utilization
- Transport and local delivery routes
- Vendor pick-up potential
- Opportunities for outside carriage
- Operating policies and procedures
- Fleet maintenance and replacement practices
- Alternative fleet management organizational structures
As a result of our analyses, transport fleet operations were centralized, an improved mix of private and outside carriage established, increased fleet utilization was achieved, excessive equipment and drivers identified, and more formal operating procedures instituted.
Annual labor cost savings of over $300,000 has been achieved within a year. Equipment capital recovery and additional vendor pick-up allowances were also achieved.
International consumer goods manufacturer
Feasibility of A Home Grocery Delivery Service
An international conglomerate based in a major Asian city was interested in the feasibility and desirability of entering the U.S. home grocery delivery business. A major Sunbelt city was selected for detailed examination of the alternative concepts:
- Retail store based order assembly and delivery
- Warehouse order assembly and delivery
- Warehouse order assembly with customer pickup
The metropolitan area selected had no current supplier of these services. We conducted analyses of the alternatives in the following areas:
- Facility location
- Route economic cost
- Stop size and route density
After extensive field market surveys and financial analysis, we recommended that the client approach for acquisition a successful regional food chain that offered store order assembly and hold for pickup services. This was the quickest route to market.
In Phase II, the client conducted negotiations with the supermarket chain to use its stores to stage for consumer pickup or deliver to the home.
Soft drink manufacturer
Strategic Sourcing Appraisal
The President of a national beverage producer requested an analysis of his company’s purchasing activities to identify areas for profitability improvement.
Purchased materials, which represented over two-thirds of the total cost of goods, included the following categories of finished goods components:
- Aluminum cans
- Steel cans
- Glass bottles
- Metallic foil containers
- Packaging materials
The costs of these materials were examined as well as current purchasing policies, practices, and procedures. Interviews were also conducted with marketing, distribution and field operating personnel plus selected suppliers to identify areas for cost reduction and purchasing economies.
As a result of our appraisal the following results were achieved:
- immediate savings opportunities of over $4 million were realized
- a series of longer term actions were prescribed, in strengthening the organization and purchasing information systems
- annual operating cost reductions of nearly 10% were identified
In addition, guidelines were developed for stronger centralized purchasing and improved reporting systems.