Beaulieu Group Better Understands Operations
Conducting business as Beaulieu of America, the closely held Beaulieu Group is the largest carpet-only producer in America and the third largest carpet manufacturer in the world. Its brands include Bliss by Beaulieu, Coronet, Hollytex Commercial Solutions, and Beaulieu Property Management Solutions for the multi-family housing industry. Through its dealers, Beaulieu of America distributes carpets to home improvement chains and commercial contractors.
The privately-held company, controlled by the Bouckaert family, is headquartered in Dalton, Ga. and operates facilities in North America.
The privately-held company, controlled by the Bouckaert family, is headquartered in Dalton, Ga. and operates facilities in North America.
Business Challenges
Beaulieu Group sought to better understand the financial impact of its operational decisions. They had difficulty understanding the true financial impact of changing demand conditions and volatile input prices as the fully allocated costing methodology assumed a linear relationship between demand and profitability.
- As forecasts varied, the siloed nature of the organization assumed a linear response in supply. Decisions they were making were based on historical rates, engineering studies, production and capacity utilization.
- Some products were petroleum-based and others were not. As a result, petroleum price volatility did not affect all products uniformly, and standard costing methodology did not take this into account within the time frame required to adjust prices, product mix, and inventory.
These challenges were accentuated by a complex product portfolio comprising thousands of SKUs and an intricate supply chain consisting of between seven to 15 levels of intermediate products which could be manufactured internally and externally. These challenges made it difficult for Beaulieu Group to predict what business was optimal and which customers were the most profitable to serve.
Solution
Beaulieu Group selected Integrated Business Planner (IBP) from River Logic Inc. for planning and what-if analysis. With IBP, Beaulieu Group is able to identify critical areas where plans are short of targets; the root causes underlying any variance; and course correction actions that can be taken to bridge the gaps between target and plan, as well as opportunities to exceed target. Through holistic impact analysis, IBP helps Beaulieu Group ensure that all actions are targeted and balanced.
IBP pulls information from Beaulieu Group's line of business systems, including:
- Sales forecasts, prices, new product introductions
- Production rates, costs, capacities
- Material pricing, supplier contracts, outsourcing obligations
The enterprise planning group enters in policy assumptions on capacity utilization, inventory targets, and production constraints. The solution then creates forward-looking financial and supply plans. Gaps between targets and plans are highlighted on an exception basis.
IBP helps Beaulieu perform root cause analysis to understand the underlying reasons for gaps. It provides a core function called Opportunity Value, which identifies the direct impact on the bottom line of fulfilling a sales order, increasing capacity, or dropping a product line without having to run simulation scenarios. Knowing Opportunity Value has allowed Beaulieu Group to identify the most profitable products and customers and the value of shorting or promising orders.
"Our goal is to move from disconnected silos to a collaborative planning process that spans sales, marketing, operations, and finance. River Logic is helping us make this transformation," explains Gary Herd, senior vice president, Production and Inventory Planning, Beaulieu Group.
With these new capabilities, Beaulieu Group can take targeted actions to bridge gaps between plan and targeted performance.
Value Delivered
Beaulieu Group has now seen value with this new solution including:
- Holistic enterprise model, serving as an effective communications platform between sales, operations, and finance departments.
- Ability to truly understand the financial impact of operational decisions -- "putting numbers to decisions"
- In six months time, achieved significant cost savings through policy changes that were driven by IBP:
> In 2009, eliminated a shift (12 hr shift -- 36 hours run time) at a dye facility, based on optimizing capacity allocation to maximize profit. Managers run overtime at other facilities when necessary.
> The company re-dyes off-quality carpet to darker colors. Previously, managers could not quantify the true cost of reworking off- quality carpet, including the true cost of inventory of the reworked carpet. Additionally, off-quality carpet had always been a challenge to sell. A cost benefit simulation, based on the ability to sell off spec vs. reworked carpet was performed and resulted in a much better understanding of the actual costs associated with this process.
- Beaulieu Group can go to its biggest customers and sell them products that make sense to run and capacity can handle. Managers can now narrow product lines without sacrifice.
- SKU Rationalization -- by understanding the true cost of goods sold, based on actual operating costs, Beaulieu Group has been able to make better decisions regarding pricing structure. The margin, based on standard costs, was much different than actual due to changing product mix.
- Success has led to future plans with IBP -- cash flow planning, expanded horizon capacity planning, and optimizing run sizes for batch processing and working capital covenants.
"Integrated Business Planner has helped us gain fact-based analytic and decision-making capabilities by providing visibility into revenue and profitability performance. The solution has challenged us. We now spend less time collecting information and more time analyzing and getting value from it, including identifying what business is the most optimal and which customers are the most profitable to serve," says Bill Cox, vice president, Manufacturing and Operations Accounting, Beaulieu Group.