Praveen Anthony Ramanayake – MSc.Global Operations – HKUST Business School

Vitalucrum Specialty Foods, Case Solution

Leadership Imperatives

As the new chief supply chain officer coming in, I would like to layout my first 30 days as follows,

1. Prepare myself It is important to take a mental break from my previous work experience and

situations, it is important to understand what ever work for me in the past won’t work the same here and I should prepare myself from a fresh and humble new perspective.

2. Learning Technical Capabilities – As requested by Mr. Marrini I would take the first four days

of the week to visit France, Zurich, Mumbai and Altoona to get a ground idea of the operations. Try to understand how operations are run, to get to know their respective teams.

Culture and organizational Politics – It is important for me to understand my predecessor lost his job mainly because of a disagreement with Mr. Marrini (C.E.O), it’s a mostly a family business, board members are either family or friends of family. The C.E.O also has a short temper. It will be good to learn more details about the culture and my predecessor calmly over small talk within the first month.

3. Strategy & Transition situation This is a classic Turnaround type of career transition where the C.E.O expects you to

fix organizational problems and expects quick and notable fixes to issues. A Turnaround requires faster bolder moves, focusing more on technical learning and

strategies coupled with a hero style of leadership. 4. Try to secure early wins

It’s important to secure some early wins for the team to build confidence and a sense of optimism within the team.

The company currently faces business problems (refer to additional business unit challenges page 5) related to the Sales, Transportation, Logistics and inventory. Except for sales all others fall under my leadership. I believe that I should first focus on trying to understand and solve problems for which I’m directly accountable.

Early second week I will focus on meeting my direct reports (VP’s for Logistics and Inventory), try to understand the problems behind the main issues , this will also be a good chance to consider ideas and issues Raj (VP ,Inventory) had highlighted. Since the VP for Transportation is overseas I will plan to meet her as soon as she’s back in three weeks’ time.

5. Meet the C.E.O in person and negotiate As soon as I’m done meeting all my direct reports and understood the problems and

with possible solutions it will be a good time to meet the C.E.O in three weeks’ time.

By then I would have met Mr. Cashman and VP, Transportation and have a holistic view of the problems related to transportation and distribution and if Mr. Cashman’s ways of working is conflicting with the solution, I can get the C.E.O to facilitate a workable solution (he had volunteered to do so).

It will also be a good time to discuss what’s exactly expected from me and to negotiate and understand what are the KPI’s assigned to me.

6. Achieve Alignment within my team After the C.E.O’s meeting would be a good time to communicate the mission, vision

and strategy to the team, to make sure everyone is on the same page and working towards clear goals.

7. Build my team and create Alliances After achieving alignment with my team, I would like to get to know them

individually and I will get to know their individual strengths and weaknesses and find ways to optimize our team’s processes.

Developing and fostering relations and alliances across the departments is also vital. A good relationship with Mr. Cashman for example would have solved most problems related to distribution, a problem the previous SVP, Supply chain couldn’t address.

Week Objectives1 Mon-Thu ,overseas site visit – get to know teams and operations ground

view Friday – meeting with Mr. Cashman – get to know him and concerns he has

related to Supply chain operations 2 Mon –Prepare for the Executive budget review (look into predecessors

work) Tue – Budget review Wed – Meet Terri Nova ,discuss about the Eco Coffee Maker issues Wed-Fri, Meet up with VP’s for Logistics and Inventory planning get to

know department problems and how to address them. 3 Conference call with VP, Transportation, get her inputs

Get InTouch with Sal Goodwin ,try to understand distribution costs Meeting with Terri Nova , prepare for the board budget reviews Meet up with the C.E.O, Report suggestions on Eco Coffee Maker issue,

share specifics on distribution costs, discuss about the 3 year plan and upcoming budget review. Also discuss about his expectations and KPI’s set for me to better align expectations of both parties.

4 Meet up with the team ,communicate goals ,values and strategies Individual meetup with direct reports to better understand each person’s

strengths /weaknesses and issues related to their role Meet up with heads of other departments such as Procurement ,to foster

good relations and come up with ways to work together to address issues that are indirectly affecting each other such as O-ring supply’s for production equipment could be due to O-ring quality issues.

Building a Strong Organization

The ultimate goal of any organization is to reach the highest level of effectiveness in whatever outcome it’s trying to achieve. Therefore I would like to make use of a generic Team Effectiveness model to maximize effectiveness of my team.

On an individual level I would like to analyze each member’s abilities and job fit, are they doing the best work that fits their profile? If not, what initiative should I provide? Training, exposure to specific projects to enhance development .How can I motivate them? What type of intrinsic motivation is required? Finally I would look at the team as whole to see how team processes are carried out, are they well-coordinated? Are there any conflicts within the team? Could it be cultural integration issues….etc

Michelle Van der plaadt: She is a great employee who is a contributor in all responsibilities assigned to her. She is an extraordinary contributor in terms of managing external relationships however she seems to be spending too much time on this aspect that it’s holding her back on other key responsibilities assigned to her. I would not advise to go ahead with the Stanford training course as it will consume even more extra time and incurs training cost to the department, instead I will request the CFO she shadows to do a knowledge transfer and skill up

Michelle along with the P&L training. I will also advise her to not to take charge of every aspect under her, instead she needs to distribute the work load effectively to her team which would free up much needed time for her. I would also encourage Michelle to spend more time with her team through fun team building sessions, provide coaching (for the negotiation team for example ) and basically get to know and be visible to her subordinates to build more close team relationships. She doesn’t always need to be out of office on networking activities, she could send her immediate subordinate to represent her when it’s not essential to be there in person.

Rajish Mutambani: Raj is an analytical minded worker, he is mostly exposed to technical related stuff mostly involved with numbers and modeling. He too needs to develop skills to work as a team, to distribute the work load instead of going at it alone and develop C-level relationships. I will make his conflict management mentorship program compulsory and part of his MBO (management by objectives), I will allocate significant weight to this point to make sure he gets rewarded if he achieves to convince his mentor’s that has fully engaged and embraced the process. I will also assign Raj with a C-level executive, both of them will work a project on how improve O-ring inventory planning and they will share their ideas after their research with me. The activity will have a common goal for both, it will help overcome wrong perceptions Raj has about management executives and foster working together with C-level executives and build trust between the two parties. Raj also needs to build trust with his subordinates, he needs to understand their strengths and weaknesses so that he doesn’t need to work on things alone. Implementing team building sessions and working on projects together would solve most issues on trust and conflict management. A managerial communications course for him would be of great benefit and will make him an effective communicator of his ideas.

Woodrow Dugan: Woody also has the same issue of being not visible and out there with his colleagues. I will try to incentivize his filed trips by reimbursing transport and meals costs. Will also include the number of field trips in his MBO so that he will do his best to be in the field more. Make the training course mandatory to improve his executive presence. Its best for him also to shadow a senior or work on a project alongside a C –level executive to build trust and better working relationships.

Organizational challenge Recommendation Employees need to know their

weaknesses, goals should be clear in rectifying them. Incentives need to be given once they reach those goals

Implement a personalized MBO (management by objective) matrix for each employee. It is proven that employees learn better when they drive their own development. Make it part of their KPI’s, give incentives for targets reached and recognize them.

Spending too much or too little time in office or in the field

Reimburse field visit costs such as transport and meals.

Set a target of filed visits in their MBO Lack of visibility and time to

engage with the team Set a date each month to have a company subsidized

fun filled team outing. It will be a good way to blow off steam and get to know your team more personally.

Learn about better time management skills from seniors by engaging in knowledge sharing sessions.

Poor delegation of work load Mangers need to build trust and know their team better. Working on projects together and Team building sessions would help.

Make it a part of a managers MBO to train up his/her subordinates each quarter. This will eventually free up time for busy managers and also help skill up employees

Lack of executive presence and poor communication skills

Provide training on managerial communications. Provide free memberships to organizations like the

Toastmasters club for employees to improve their communications skills during their off days.

Poor team spirit and distance Encourage a culture of openness, let the distance of power be minimized. Let employees be felt same level.

Engage in fun team building activities

Leading Change and Transformation

Organize the project - The project needs to be organized in terms of Scope and stakeholders. In every phase there should be a person driving it with a sense of ownership. In terms of organizing, vendors are not showing up for critical meetings and the project is delayed. The seasonal factors of vendors should not be an issue to our project. We should move to get their commitment or consider alternative vendor’s. So as first move I would like the project manager to get the vendors commitment to attend critical meetings , get an idea of their availability and reliability and be bold to consider alternatives if required as our project is critical to us.

Plan the Work flow – after re-engaging with the vendors we should amend our timeline and schedule to make sure the project is delivered in time looking forward in time. If not work on contingency plans and inform the seniors on the progress.

Gain commitment from all stakeholders – Not only from vendors but internally there seems to be delays in the approval process , its best to gain support from all internal stakeholders and make sure their all on board. As person of influence and from my capacity I could work closely with procurement to see what the delay was about in the approval process, if there are any issues try to fix them the soonest and make sure it won’t be a problem in the future.

Manage the Execution – As a manger it is important to monitor the progress on each milestone on a daily basis. Having regular meetings and conference calls with the team is essential. If they require approval for resources, approval or guidance from higher management, I could be a focal point for them. As the SVP, supply chain I should make myself directly contactable to the project team and be willing to give priority to their requests according to the urgency and priority of the project stage.

Mastering Complexity

It is essential to maintain the European feel and touch in coffee as Europe still is one of the biggest consumers and remains a very profitable market. Running manufacturing operations in Europe has been very challenging for most companies due to high wages, economic downturn…etc. These factors make us move towards leaner operations in all aspects to stay in business.

Rising labor costs are forcing us to outsource certain parts of operations, it is important to skill up the existing labor force to handle more value adding job functions in order to justify wages. It will be a right time highlight the need for skilled workers and probably government subsidized training courses to skill up the existing work force.

The importance of waste management and complying with the green manufacturing standards is the way forwards long term business sustainability. It is important to highlight that Vitalucrum has plans laid out in this direction on its 3 year plan, to come up with waste water treatment and utilities consumption reduction.

Companies are also trying integrate factory Automation and e-commerce platforms to keep the changing landscape hence education and investment policy formulation in this direction would benefit Sweden’s manufacturing sector.

The access to long term low interest loan facilities would benefit a lot of companies that have their profit margins cut in recent times but are looking forward to expand business in the right direction.

The promotion of Swiss industry and trade exhibitions would greatly benefit companies like Vitalucrum since it will a platform to source highly talented specialists , contractors and new innovations to further our 3 year plan and expansion goals as well as the Swiss business ecosystem.

It’s worth highlighting how the Swiss environment has benefited us so far in terms of corporate tax benefits, access to high quality labor pool (coffee tasters..) …etc. which makes our business still profitable.

The Future of the Supply chain

I believe that the consumption and perfection of coffee started from Europe. Even though the industry has been shifting to Asia and other emerging markets, it is vital to understand the eco

system around the coffee industry. Some coffee makers, tasters and even planters have been pioneering their trade for generations, this is something you can’t simply outsource. I goal will be to optimize supply chain operations to such extent that we outsource what could be done elsewhere at the same service level and quality while making implementing lean operations concepts to whatever that should be essentially European to maintain a competitive advantage across markets.

1). Reduce Manufacturing Operations costs

Based on the 2012 actual income statement, labor costs account for over 44% of the total conversion costs incurred. Zurich being in Europe it is quite appropriate to make the assumption of high labor costs.

For processes that require batch processing and little expertise like, roasting, grinding filtering…etc. can be automated over the next 3 year period. It will incur a significant down payment initially but eventually pay off in the long term. It shouldn’t be an aggressive move but a gradual and slow move towards higher automation levels keeping in mind the company has limited capital for expansion.

Reduction of maintenance costs of plant equipment, should work closely with maintenance engineering to have a close look of their preventive maintenance schedules to work out ways to source high quality parts and optimize scheduled down time and reduce unscheduled down time. (MTBF).

Procurement should also work along with engineering when sourcing for higher quality parts, raw materials…etc. Look into sourcing raw materials from emerging markets, alternative suppliers to drive down material costs.

Implement initiatives to reduce utility costs, for example initiate hot shutdowns for equipment that are idle in the production flow to reduce electricity bills , waste treatment and water usage recycling could be used as well. Many European companies receive further tax deductions and rebates when green initiatives are implemented to reduce waste.

2) Reduction of Fixed costs

Some HR operations such as recruiting can be outsourced easily to emerging markets since the use of online platforms make this possible.

Reduction of selling costs by optimizing store locations and implementing an online platform.

Work towards outsourcing the distributions operations to 3rd party distributers’ .This will save us a lot of costs on transport, D.C management…etc. Our product sales volumes are not that high to maintain our own distribution network.

These initiatives would see a direct reduction on General and Admin costs as well. Outsourcing of packaging to emerging markets would be another consideration.

3). Initiate a TPM program and encourage lean operations

A proper TPM initiative would reduce raw materials usage and waste It could optimize production processes to improve employee productivity

R&D initiatives would bring about new innovation, new ways of processing coffee, new flavors...etc.