Battling the Squeeze on Margins

Will businesses be able to depend on traditional formulas for success in these margin-squeezing times: price up to cover rising input costs, spend back in marketing to manage elasticities, roll out new products to fill the leaky revenue bucket and drive some top-line growth, and lean on the operations group for even greater productivity to close the gaps in the P&L? Without a change somewhere in the system, why would this formula produce a different answer?

A Growing Productivity Challenge

It’s looking like the food industry is going to need a different formula: 80% of the U.S. crops in moderate to severe drought, rising food commodity prices and therefore food prices headed up 4-5% in the face of declining consumer confidence, struggling jobs growth and a Consumer Price Index (1.7) that’s already about the same as the wage inflation rate (2.0) (in other words, consumers are getting squeezed too).

Continuous Improvement Not Enough

I’ve written before about the insufficiency of continuous improvement and the odd trap of incremental growth and productivity. More recently, the industry seems to be recognizing the growing need for supply chain innovation. Businesses have invested millions of dollars in continuous improvement efforts, things like lean and six sigma, and in some cases have reaped huge rewards. But, these efforts can only produce so much before the law of diminishing returns takes over. Something else is needed. Something that creates a new performance curve, establishes a new baseline for continuous improvement efforts.

End-to-End™ productivity innovation (E2E™ for short) is a proprietary methodology for filling the productivity pipeline with an array of qualified savings opportunities above and beyond what continuous improvement efforts are already producing. Like it’s continuous improvement counterparts, it’s a process with tools and techniques that can be replicated and produces supply chain innovations that can be used to close gaps, enhance margins or reinvest in the business. So, E2E™ builds on your current continuous improvement efforts. It does not replace them.

The Three E2E™ Strategies

1. Assess End-to-End™ – The methodology looks at everything from raw material suppliers to consumers and yields incremental opportunities along the continuum from large, strategic disruptive innovations (e.g., game-changers) down to additional small continuous improvements.
2. Align the Opportunities ­– Once the assessment is complete, opportunities are qualified, platformed if appropriate and aligned with the organization. Champions for every qualified opportunity are named.
3. Activate the Winners – All winning opportunities are developed and commercialized using I2M™, your NPD process or a similar approach.

Over the next several weeks, I’ll explain each strategy in detail so stay tuned. With E2E™ businesses will have productivity pipelines that can help them meet the growing challenges and take some of the squeeze off the margins.