Activity Based Costing | Strategic Review

Through strategic reviews and benchmarking, McBride Plc achieved significant business enhancements and stakeholder engagement.

Background

With over 18 manufacturing operations in 10 countries, McBride is a leading British-based manufacturing business, noted as being Europe’s biggest maker of retailer Own-brand household goods and providing contract manufacturing for brand owners. Manufacturing over 150 brands, McBride products are delivered to 250 customers in 70 countries annually.

Challenge

Stagnating sales, declining profitability, an excessive overhead cost base and a lack of clear leadership had created a need for fundamental change, with management focused on delivering business as usual rather than transformational change.

Solution

The approach was to undertake a strategic review of the UK operating company under the guise of an activity-based costing and benchmarking exercise, to better engage management in understanding the business as a platform for performance improvement planning. Libra carried out a full P&L ABC modelling exercise across the UK and Italian businesses (5 sites). Working with group and site leadership teams, the ABC review was used to refocus the business on the true costs attached to sites, customers and category service. Perceived loss or profit-making activities were re-categorised and corrective action plans were developed for the Sales, Operations and Supply Chain teams to address under-performance and drive profitable growth. A benchmarking exercise was also conducted highlighting substantial gaps between McBride structures and cost base and those of comparable own-label organisations. Again, these outputs were used as the basis for business improvement planning.

Results

The board demonstrated a firm commitment to the strategic direction. This was accompanied by the active engagement of stakeholders throughout the business in the revised plan. A pivotal move was made to eliminate non-value-added activities completely. The initiation of SKU and customer rationalisation processes not only began but also started delivering tangible results. Furthermore, outsourcing was set in motion, and any non-business-critical reporting was duly excised.