Context

Our client, a large South East Asian wood products business, operated 23 integrated assets and employed 24,000 people. The business had developed an aggressive top-down five-year plan to deliver an additional US$325m in EBITDA. This growth was reliant on expanding the established plywood products into non-traditional domestic markets, and introducing an innovative and environmentally sustainable decking product to export markets. Although the business had achieved a strong market position with its range of plywood products in the domestic market, the business had limited success introducing new products and expanding into export markets, therefore putting the assumptions of the five-year plan at risk.

PIP was engaged to determine the business’s readiness to deliver the five-year plan, and develop the improvement roadmap to successfully expand plywood and decking sales in to export markets.

Key insights

  • The majority of the business’s planned growth came from sales of both plywood and decking products into new export markets. Many of these markets were very different to the domestic Indonesian market and included large Western economies such as Europe and North America.
  • There were a large number of export markets being targeted for both decking and plywood products, but the export markets had not been prioritised to ensure resources were being focused on the most important market first.
  • There had been some export market growth to date, however it had been achieved through existing relationships with local distributors rather than using a rigorous screening and selection process to identify appropriate distributors. In addition, there were very few binding contracts in place to ensure the client’s and distributors’ interests were aligned, and there wasn’t a mechanism to monitor each distributor’s performance.
  • The client lacked a detailed understanding of the ecosystem in each export market, and therefore was entirely reliant on the local distributors to provide this expertise. The distributors were often in a sales principal role and were managing the whole region. Consequently, there was a limited knowledge base on which to develop region specific sales plans to deliver the required growth.
  • There were notable wiring gaps in the sales function, particularly relating to accountability, coaching and incentives. These gaps made implementing export market growth plans through the existing sales organisation very challenging.
  • The factories were not reliably producing high quality products (<92% on-specification) nor achieving acceptable Delivery-In-Full-On-Time (DIFOT) levels(<52%). This was driven by a lack of focus on producing the “right product the first time” and shortages of critical feed materials. These shortfalls presented a major challenge to growing in highly competitive export markets.

The Results