In the early 1990s Pillsbury effectively used managerial accounting techniques to address their operational challenges. They faced demanding consumer preferences and competitive pressures in the food industry they were operating in. This caused them to reexamine operations and try to eliminate inefficiency throughout their organization. Our paper seeks to examine the Pillsbury business reengineering proposal that focused on $300 million in cost reductions. We will analyze the role Activity Based Costing (ABC) and performance measurements played in their reengineering plans as well as analyze a company that has done the same.
To begin with, Pillsbury Company was founded in 1869 as a flour milling company located in Minnesota. They later extended …show more content…
However, the study focused on Customer Supply Chain since it made up 85% of operating expenses. The customer Supply chain was then broken down into three sub-processes. In Total Customer Development subprocess, an improvement was found in eliminating trade spending inefficiencies. The second sub-process, Fast Flow Demand Replenishment identifies the savings that could be realized by better matching Pillsbury’s purchasing, manufacturing, and distribution operations to consumers’ purchases. Value-Based Sourcing and Supply focused on Pillsbury’s system of vendors and sourcing arrangements for its more than $500 million of raw material purchases. Pillsbury believed that flexible ingredient specification would allow them to select more efficient vendors. To realize this, they believed the vendors would have to become partners with Pillsbury in a total cost reduction process. By the end of the Phase 1 plan, Pillsbury developed a plan that promised margin improvements through cost reductions and revenue enhancements of more than $100 …show more content…
In the past, Pillsbury’s supply chain had different department or segments working independently focusing only on their operations, profitability and tasks. To meet their new goal of $300 million in cost reductions, it would require an integration of all of these units so that they are working closer together to eliminate any deficiencies and waste, and work toward the overall profitability and efficiency of the entire supply chain and in turn the entire
To begin with, Pillsbury Company was founded in 1869 as a flour milling company located in Minnesota. They later extended …show more content…
However, the study focused on Customer Supply Chain since it made up 85% of operating expenses. The customer Supply chain was then broken down into three sub-processes. In Total Customer Development subprocess, an improvement was found in eliminating trade spending inefficiencies. The second sub-process, Fast Flow Demand Replenishment identifies the savings that could be realized by better matching Pillsbury’s purchasing, manufacturing, and distribution operations to consumers’ purchases. Value-Based Sourcing and Supply focused on Pillsbury’s system of vendors and sourcing arrangements for its more than $500 million of raw material purchases. Pillsbury believed that flexible ingredient specification would allow them to select more efficient vendors. To realize this, they believed the vendors would have to become partners with Pillsbury in a total cost reduction process. By the end of the Phase 1 plan, Pillsbury developed a plan that promised margin improvements through cost reductions and revenue enhancements of more than $100 …show more content…
In the past, Pillsbury’s supply chain had different department or segments working independently focusing only on their operations, profitability and tasks. To meet their new goal of $300 million in cost reductions, it would require an integration of all of these units so that they are working closer together to eliminate any deficiencies and waste, and work toward the overall profitability and efficiency of the entire supply chain and in turn the entire