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I. Supplier Consolidation
Turnkey Strategy
II. Organizational Restructuring
III. Monetary Impact of Turnkey
Implementation
I.
Supplier Consolidation
At Least 57% of the revenue of the company comes from North America
Select suppliers in close vicinity to NJ
Reduce logistics costs
Third party manufacturing facility in Europe - Closeby Distribution and logistics Beville,
France to get goods across Europe
Potential Risks of Supplier Consolidation
Potential intangible
Widest possible #1 Priority = Service
cost efficiencies Suppliers within the Single-sourcing
product & service Level
same industry
offerings from
Accounting Monitor product
suppliers Supplier with
Vendor management Proven reliability & usage
logistics &
Inventory respect from Cost reduction
Expertise & warehousing
Purchasing competitors suggestions
knowledge required capabilities
Info amalgamation
Re-designing Contracts & Relationships
II.
Purchasing Process
Current Situation: Widespread individual purchasing from many firms with over 23 different
collections (A collection can have anywhere from 2 - 30+ different product lines within it)
Solution: Consolidate but include grassroots level employees in the purchasing process
Reduces overall time spent on purchasing
Lowers EAs need to handle all of the product completement process
Increased ability to seek out producers and purchasing power
Maintains active worker involvement to ensure accurate purchasing decisions
Organization Before
Organization After
Forecasting Organization
Current Situation: Short term oriented division level forecasting
Solution: Centralize large scale purchasing decisions towards longer term goals
Increases company-wide purchasing power
Allows for a broad forecast that analyzes decisions on a larger scale
Reduces amount of time spent on forecasting
More accurate long term forecasting of broad trends
Inventory Management Organization
Current Situation: High levels of customization, slow moving SKUs and long lead times
are resulting in extremely large inventory levels
Solution: ERP system for inventory management to provide a competitive edge with
abilities to plan effectively, execute predictably with customers and minimize labor
costs and errors associated with manual reconciliation
Properly plan and replenish orders
Leads to fewer transaction and better inventory accuracy
Allows ability to react quickly to surplus inventory
Categorize inventory to better analyze assumptions
ABC analysis results
Increase customization of products
Current Situation: The company must achieve a Aggregate data will be used to collect
more customer oriented approach to the information about consumers. Then a price
organizational design to align more with the analysis will be conducted to determine how
much consumers are willing to pay.
Turn Key project
III.
Current Financial Situation - Q2 2008
Financial analysis of Elizabeth Arden after Pirards initial changes.
Net Sales $1, 127, 476 $1, 141, 075 $1, 070, 225
Shareholder Equity $320, 927, 000 $336, 601, 000 $336, 778, 000
Contracts
(procurement & legal)
Purchase orders
Invoicing
Supplier management
Insurance
W-9 Processing
MSDS / Safety
compliance
Savings for Elizabeth Arden
Direct Spend $410 M vs. $380 M Indirect & Materials Spend
Bottom 25%
$1,406,000
-3.85% $13,528,000
$18,050,000
Bottom 50%
Upper 50%
-4.22% Upper 25%
-7.78%
-12.53%
2. Reduced Management Costs - Procurement & Supplier
Sourcing a supplier:
Labor
Outsourcing
Technology
Overhead
$700 -$1,400
internal costs for each supplier
Savings from Organizational Restructuring
Savings from Inventory Consolidation
2006 $269,270,000
2006 $335,815,000
Focus on forecasting
IV
Organizational Structure Under Revlon
June 2016 Elizabeth Arden acquired by Revlon
Past failures in Elizabeth Arderns Supply Chain
Product-level purchasing complexity
Increased Supply chain overhead cost
MICROBEAD brand discontinuation
Revlons Competitive Advantage
NETAPP: Advanced SKU Database
Over $65 million invested in CSR
Centralized Purchasing Strategy
Market share, Product Development
SYNERGY IN DISTRIBUTION NETWORKS
Net Sales $1, 175, 500 $1, 238, 273 $1, 344, 523 $1, 164, 304 $971, 098 $ 966, 733
VI.
Case Assumptions
Annual contracting cost per supplier = (Total current year costs of staff contracting with suppliers /
Total number of suppliers contracted with during current year) + (Total current year depreciation and
maintenance costs for supporting systems / Total number of suppliers contracted with during current year)
Annual invoicing cost per supplier = (Total current years costs of accounts payable staff responsible for
supplier payments / Total number of invoices paid for current year) * (Total number of invoices paid for
current year / Total number of suppliers with spend for current year)) + (Total current year depreciation
and maintenance costs for supporting systems / Total number of suppliers with spend for current year)
References
http://www.mypurchasingcenter.com/files/6213/8929/0096/Hackett_Group_Supplier_Consolidation_Research_Article_1.pdf
http://www.stephenguth.com/supplier-consolidation-benchmarks-how-much-will-i-save/
https://www.nextlevelpurchasing.com/articles/supplier-consolidation.php
http://otworkplaceteam.co.uk/blog/2016/06/22/six-major-risks-benefits-supplier-consolidation/
https://www.sophos.com/en-us/medialibrary/Gated%20Assets/white%20papers/UK%20public%20sector/sophoswp-top-ten-unbeata
ble-benefits-uk.pdf?la=en
http://www.supplychainbrain.com/content/industry-verticals/retail/single-article-page/article/elizabeth-ardens-logistics-makeover-m
ore-than-skin-deep/
http://corporate.elizabetharden.com/supplier-information/
http://www.wikinvest.com/stock/Elizabeth_Arden_(RDEN)
http://www.vault.com/company-profiles/personal-care/elizabeth-arden,-inc/company-overview.aspx