Management Issues Faced by the Client

The client company was a manufacturer and retailer of consumer goods with many brands in its portfolio. The visionary founder led the management of the company for many years as its president, significantly growing several brands in a short time. However, the brand’s vision fell out of step with the times, and profitability declined. The company found itself in a situation where it needed to simultaneously strengthen its organization and governance while also improving profitability under fund management.

At the time the fund became involved, the organization and governance situation was such that, due to the strong influence of the founder, a culture had developed in which employees were unable to speak out about branding direction or product planning, and there was a shortage of resources in areas such as IT, SCM and human resources, which were areas in which the founder was unskilled and had a limited understanding. Despite its inability to accurately assess its revenue situation in numerical terms, the company continued to issue guidelines strongly oriented toward increasing sales.

In terms of profitability, the organizational and governance conditions resulted in branding that deviated from market trends and a situation in which weak SCM resulted in the purchase of large quantities of products with low quality relative to their cost. The increase in inventory levels led to the routinization of discount sales to dispose of inventory, which in turn led to a further reduction in manufacturing costs (i.e., lower quality). In this way, the company entered a downward spiral that resulted in even lower sales and higher inventory.

The Content and Approach of the Support We Provided

Support measures were organized into six categories, ranging from addressing the organizational and governance issues that were the root causes of the problems, to reforming the operations that had become distorted as a result of those issues, to correcting the company’s strategic direction.

In addition, in terms of how the organization should have been managed in order to promote each measure, support was provided according to three approaches: “measures that should be promoted slowly and carefully while exchanging opinions across departments,” “measures that cannot be implemented without major business decisions from top management,” and “measures that should be implemented immediately.”

During the first three months, we identify and organize management issues, determine an overall direction for improvement measures, and derive the six improvement areas shown above.

In the following nine months, we establish a framework to implement these measures and appoint personnel, who are selected to match the type of activity, and assign missions. This team provides support for progress monitoring and helps remove obstacles to progress.

Dividing the activities into different types enables us to use different mechanisms to check progress and make business decisions. In essence, the client company’s executives take responsibility and lead the project, but if the client company lacks the necessary management planning functions, FMI will dispatch the head of the management planning department to offer support. In addition, the planning of some digital measures is also handled by the experts at FMI.

Results Achieved Through This Project

• We organized and clarified the causal relationships between organizational, governance and profitability issues, as well as the orientation of solutions, and fostered a common understanding among the newly appointed president, the fund and the senior management team.
• In contrast to the situation where the revenue situation could not be accurately grasped at the level of KPIs, a mechanism was established to monitor revenue and KPIs on a monthly basis, making it possible to grasp the revenue structure of the As-Is and To-Be. As a result, it became possible to discuss and comprehend the range of improvement that budgets and each measure should aim for on a quantitative basis.
• Contributed to short-term profit growth through measures that could be implemented immediately, such as clarifying the PL and inventory responsibilities of EC, which had previously been unclear between organizations, improving MD efficiency, and reviewing system investment costs.
• Apart from the measures that were implemented immediately, we also supported the development of a structure for promoting the review and analysis of specific issues. (Although this was after the support period), we achieved improvements in EBIT and made inventory levels more reasonable.
• Just before the end of the support period, we worked with the newly appointed president to help him put together the annual vision and budget figures. We have created a situation where the new president can be successful without the support of FMI by having the client company’s employees take over management planning functions.