You are Renata Vaughn, the first Vice President of Supply Chain in the history of Smoky Mountain Foods in Chattanooga, Tennessee. In your first week a service-watch letter from your largest customer and a board charter worth US$40 million land on your desk. Before you spend a dollar of it, you must name the threat your strategy answers first; the board wants the plan in six weeks.
The situation
Smoky Mountain Foods makes branded sauces, dressings, snacks and ready meals. It turns over US$1.25 billion at an 11% operating margin, with four plants, six distribution centres and about 3,800 people. It grew by acquisition, and it shows: three ERP systems that do not agree without manual reconciliation, no common cycle in which sales, plants, logistics and finance settle one plan, and planning in the hands of five people with spreadsheets.
The letter comes from the grocery chain that buys about 22% of sales, some US$275 million a year. Deliveries arrive on time and in full 89% of the time; the contract requires 96%. A second strike within two quarters would delist the slower-moving items and open a review of the whole range.
It is not the only number in the red. Total supply-chain cost runs at about 26% of sales, against a peer benchmark of 21–22%. The cash-to-cash cycle is 94 days, and about US$60 million of inventory sits above what a well-run network would carry; the CFO puts that first. And the fragmented systems sit behind almost everything. Your own bonus depends partly on service to that customer and partly on the cash you release.