Finding the Path to Operational Excellence at Zeni

Finding the path to operational excellence at ZENI

Executive Summary

Argentina’s economy suffering from high inflation of 15%-20% and straggling exchange rate has made ZENI suffer due to high costs and prices leading to negative profits. However apart from the external macro level concerns there are some internal/micro level concerns which needs to be taken care of on urgent basis.

• Top four clients accounted for 80% of the UFI sales. Further the sales are going good. This means that ZENI is spending money or increasing cost on 20% of sales which do not give much revenue. It should focus on 80% of revenue customers and provide them with good value added services to satisfy its customers.
• There is a huge scrap/waste which was used as fuel i.e. around 33%. Further in the saw mill process only there is 51% of the scrap.
• ZENI has over 200 SKUs offering a broad assortment of moldings but only 30 SKUs accounted for 80% of UFIs revenue. It can cut its costs by removing SKUs which are not adding value to its business.
• Plant manager, Pablo Costa was considered as highly autocratic and did not consider the suggestions given by employees which led to conflicts. This can be easily avoided if Patricio Zeni can talk to him and make him understand the importance of team work. This can further improve the efficiency in operations.

The Concerns within ZENI are:

• Product delivery is not on time. This affects the customer perspective of the product sold by ZENI.
• Customer satisfaction is ranging from moderate to poor.
• Exhibit 2 shows the delay in order with respect to orders sold. There is a huge difference seen especially in November and December 2011 with average delay going up to 21 days. This needs to be corrected otherwise we might end up losing customers.
• There is a problem in the supply chain of UFI as many areas/activities are facing difficulties in operation.

Positives within ZENI are:

• One of the largest grain and oil seed brokers with dedicated value added services.
• It employed more than 700 people with low attrition rate giving an impression of its superb culture in the organization.
•  Zeni has a strong cultural background and is the second largest lumber products manufacturer in Argentina.

Recommendations

• Enhancing operational efficiency

One of the most important aspects of a manufacturing company is its operational efficiency. It determines its profitability and sustainability. In this case, if we observe its process, we see there is a huge scrap wastage which happens combined with dismal utilization rates. It is not surprising the company’s profitability is fast declining. Hence one of the most critical things for the company to do now is to totally revamp its manufacturing process and increase efficiency.