Cost Efficiency: General Mills

MATTHEW ENIS

• Holistic Margin Management system is expected to result in $4 billion in supply chain productivity savings during the coming decade.
• Since 2010, packaging reduction on two major brands alone has cut the company's plastic use by 600,000 pounds per year, and its paperboard use by 6 million pounds per year.
• Computerized transportation management system reduced the company's transport fuel usage by 15% in its first year.

It's become an unfortunate reality for food manufacturers in recent years — input costs continue their relentless rise, but U.S. consumers are still pinching pennies in a stagnant economy. Passing along those rising costs has become a difficult proposition, but inaction is out of the question.

Forged between this rock and a hard place, General Mills' Holistic Margin Management initiative has helped the company save close to $1 billion by doing things like changing product packaging, reducing waste and making production processes more efficient.

“We are well on our way to realize $1 billion in productivity worldwide through fiscal 2012. Looking farther ahead, we expect total worldwide supply chain productivity of more than $4 billion over the next decade,” explained Sheila Kley, General Mills' manager of corporate public relations.

A holistic approach emphasizes taking stock of a whole operation, rather than breaking it down and focusing on its parts. That definition certainly applies to this system, which was begun prior to the recession in 2005. Current Chief Executive Officer Ken Powell has made it one of the company's key initiatives since the downturn.

Hundreds of different HMM initiatives are under way at General Mills, Kley said, citing a handful of recent examples.

In an effort to generate cost savings to offset “significant” increases in input costs, the company switched to a lighter plastic for the icing cups included with its Pillsbury Grands! Sweet Rolls in 2010. The switch saved money, and cut the company's plastic use by 600,000 pounds per year.

Similarly, “in January 2010, our Nature Valley granola bar cartons became smaller and thinner,” Kley said. “We shrank the width of the cartons by half an inch and the depth by a quarter inch — while maintaining the same size of the granola bars.”

The result? The new cartons use 13% less material, and more than 6 million pounds of paperboard are saved per year.

A Green Giant facility in Labatut, France, had its can supplier move to an adjacent property, resulting in savings of $1.5 million per year. The company's Rice Chex cereal brand also discovered that cutting transport costs could be a major source of savings.

And it's easy being green when cutting energy use helps boost the bottom line. A new computer-based transportation system has optimized General Mills' shipping network, saving millions of gallons of fuel and expenses, Kley said.

The system maps out the multiple destinations for the company's products, and puts more products on each truck. “We reduced our fuel usage by 15% in the first year,” she said.

And, a General Mills plant in Covington, Ga., found that installing energy meters on several pieces of equipment allowed operators to optimize the facility's production, ultimately leading to annual savings of more than $600,000 per year.