It’s the type of business restructuring capable of striking envy in the hearts of many a company board member—and particularly those known to favor one oft-repeated bit of business wisdom: Never waste a recession.
At food ingredient maker Ingredion, where the recession’s bite is directly linked to the eating habits of consumers, a 2-year-old restructuring strategy dubbed “Cost Smart” has begun to deliver on its cost savings promises.
In fact, last month, the maker of sweeteners and starches announced plans to increase its Cost Smart savings target for 2021 from $150M annually to $170M—a $20M uptick that led certain analysts to question whether now was the right time for the food giant to be stepping on the accelerator.
“Not so fast,’ says Ingredion CFO Jim Gray, who reports that he already likes what he’s seeing in Ingredion’s rearview mirror.
“The opportunity around remote work environments and online collaboration has accelerated toward us,” observes Gray, who over the past 2 years has replaced the dated architecture of Ingredion’s finance function with a new shared services model and a mandate for greater online collaboration.
The restructuring involved the relocation of 107 finance and accounting employees to shared services location in Tulsa, Oklahoma, and Guadalajara, Mexico. The movement of this part of Ingredion’s workforce is expected to be followed by that of a number of other functional areas within the company.
“This was not about lowering head count—it is about holistically redesigning processes to have a lasting impact on cost,” says Gray, who last month—along with Ingredion CEO Jim Zallie—briefed investors and analysts on COVID-19’s impact on the business. After having experienced a significant drop in demand for different ingredients in April and May, advised Zallie, the company had seen “sequential improvements” in June and July as shelter-in-place restrictions had eased.
These improvements were more than likely first detected by a member of Gray’s finance team, which had been working to better expose how the pandemic is altering the buying patterns of Ingredion customers.
“With the pandemic, there has been a change in consumer behavior that’s impacting the pull of our customer products. Then you also have the effects of a recession, in which there is less personal income, so this changes how they shop in grocery stores and how often they dine out,” comments Gray, who credits the company’s widening use of technology for helping to track and monitor customer activities.
“Whether you call it AI or just accessing our data, it’s about using analytics to help us to be more understanding and more predictive on what the demands are on our customers,” notes Gray, who adds that that today he routinely challenges his finance team to glean new insights from the frequency of Ingredion order interactions.
“Syrups might be sold to a certain customer every 2 days, while food starches might be sold to them every 3 to 4 weeks. We need to peer down on these purchases and really understand what’s happening during the pandemic,” Gray explains.
Meanwhile, Ingredion’s accounts receivable team has also stepped up its online customer outreach while alerting finance team members in real time when cash has been applied to outstanding receivables or credit limits have been modified.
“What we’re seeing is a lot more ways to reinvent, and it’s coming from that online collaboration. How are you communicating with the customer and understanding what the customer’s problem is?” says Gray, who notes that the company decided to label its restructuring efforts “Cost Smart” to help investors better connect the dots.
“Investors and analysts want to know how it is going to show up on the P&L,” reports Gray, who during last month’s call with analysts specifically mentioned Cost Smart’s impact on a number of operating expense line items as well as cost of sales.