A data-driven business planning process helps T. Marzetti Co. maximize sales and financial growth.
Americans are increasingly eating greener, and in recent years, leadership at salad dressings and dips maker T. Marzetti Co. felt as though its product innovation process couldn’t keep up with consumer demand. Mismanaged capital investments were also stunting growth.
Without fundamental changes to business operations, Marzetti and parent company Lancaster Colony Corp. endangered a reputation of top quartile financial performance in the industry and a 57-year streak of increasing cash dividends.
Lancaster President and CEO Dave Ciesinski believed the company could improve management using integrated business planning (IBP), a process for aligning a company's business goals with its finance, supply chain, product development, marketing and other operational functions. Ciesinski was familiar with IBP from a previous job, and found it to be a linchpin that enables companies to change course as needed.
One of Ciesinski’s first actions as Lancaster’s CEO was to implement IBP at Marzetti with guidance from Oliver Wight Americas Inc. A data-driven capacity planning process was developed to determine when to invest in production lines and other capabilities. At the same time, a demand planning process was implemented to create consistently credible plans with low bias.
Looking ahead over a 24-month rolling horizon, Marzetti uses IBP to re-assess assumptions about the business each month. As conditions change internally and externally, leaders plan the best way to maximize sales and financial growth.
During the onset of the COVID-19 pandemic, Marzetti team leaders say they were prepared and even comfortable with the unknown, and they developed various scenarios and plans as usual. For example, how might the company source its ingredients outside of China? How would it handle unpredictable shifts in demand?
Marzetti’s foodservice business drastically declined with the closing of restaurants while grocery store sales jumped. Despite these swings, the company reported a revenue increase of $24 million — attributed to IBP — though 2020’s second quarter.
“IBP provides the gauges to fly in all sorts of conditions, when weather is nice or not nice,” Ciesinski says.
With better aligned plans, Marzetti also saved over $900,000 from reduced expedited shipping and $100,000 from reduced internal transfers. Raw material and packaging costs dropped more than $900,000.
In all, total cost savings attributed to improvements brought by IBP exceeded $6.8 million.
“We can obviously have problems in the business,” says Steve Hill, vice president of research, development and quality at Marzetti. “But with the adherence to the IBP process, we can work through those problems and have a clear view of what’s going on in the business.”
