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A Smarter Way to Make Sausage

How Marc Cinque upgraded his sausage company, Premio Foods, to increase cash flow and reduce waste.
Sausage Software Marc Cinque hopes automated procurement will boost cash flow by $500,000 a year -- without costing any of his 400-plus employees their jobs.
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Marc Cinque was not happy. It was a March morning in 2010, and he was racing to the office for an early conference call with a potential customer. But when he pulled up to the Hawthorne, New Jersey, headquarters of Premio Foods, Cinque, the company's CEO, couldn't get past the half-dozen delivery trucks lined up at the entrance of the company's narrow driveway. Several big rigs had arrived all at once to deliver meat, spices, and other supplies to Premio, a maker of Italian sausages, creating a roadblock for Cinque. He had to reschedule his call.

It wasn't the first time Cinque had run into the wall of trucks, and when he finally made it into the office, he tracked down Charlean Gmunder, the company's vice president of operations. "What is the issue? What's causing this?" he demanded. Gmunder's response was blunt: The jumble of trucks was caused by Premio's antiquated system of forecasting and ordering -- just the sort of problem she had been hired to correct. But Cinque was still wavering on the technological fix Gmunder wanted, despite her assurances that it would make the operation run more smoothly and profitably. The new system would overhaul procurement, production, and shipping and would impose much-needed discipline, Gmunder insisted. She estimated her system would increase annual cash flow by $500,000 and save up to $150,000 annually by reducing wasted material. "The numbers made it clear this was worth pursuing, but I wasn't sold yet," Cinque says.

The problem was that implementing Gmunder's idea would require a radical overhaul of every facet of Premio's operations. Cinque, 42, had been running the company since he was 22, when he took over for his father, who had become ill. A self-taught manager, Cinque expanded Premio from $2 million in sales and 15 employees to $140 million in revenue and more than 400 employees. He had hired Gmunder, a veteran of big companies such as PepsiCo and Wrigley, in 2008 to take over for his ailing brother Steven, who died in 2009. Cinque saw bringing in an outsider as the chance to inject fresh thinking into the company and help the operation "get to the next level."

Cinque, though, quickly came face to face with reality: It is one thing to talk about embracing big change and another to pull it off. "The change process starts, and then the doubts start," he says. "Why do we have to do this? Is it really necessary? All the people who have been here are questioning it. It became a much more difficult task than I expected."

Still, Cinque knew he had to do something. Premio was still run like a small business, even though the company was producing 350,000 pounds of sausage a day. Buyers of supplies such as meat, spices, and packaging materials each had their system for projecting what they might need. The systems were often way off the mark. As a result, waste was rampant. Though Premio sells mostly fresh sausages, the company's freezers were often stuffed with frozen unsold sausages. Some unsold sausages were either donated to food banks or eventually thrown away.

But did Cinque's new VP of operations really have the right answer? Gmunder was pushing for the implementation of software -- which the company owned but wasn't using -- called MRP, for materials requirements planning. The idea was to automate virtually every step of procurement. The system would hold recipes for every product the company made, and when an order came in, the software would track the flow of that order and deduct from inventory the meat and supplies used to fulfill it. The software would then feed the information to production so the order could be manufactured and shipped. Making this system work, though, would require at least 25 Premio managers and employees to completely change how they did their jobs -- all at once.

As word of a looming change filtered through the company, rumors of layoffs spread among the work force. More worrisome for Cinque was the pushback from longtime senior staff members, who warned the change could be a costly disaster; they felt it would be exchanging one problem for another that was far more serious. John Haug, a 12-year company veteran and the director of technical services, doubted the company's ability to get the solid sales forecasts around which Gmunder's system was built. His initial view was that the MRP system was "just big corporate BS." He also feared it would result in shortages of raw materials, given the unpredictable nature of the business, especially around the holidays. "He's putting this image in my head that we've run out of meat," says Cinque. "That's a pretty big missile he's firing."

Mark Renna, director of logistics and an eight-year Premio veteran, warned Cinque about some problems that erupted at one of his previous employers when a similar system was put in place. "He had some real horror stories about customers not getting orders, trucks leaving the plant half full," Cinque says. "His view was, We are successful; why upset the apple cart? These guys understand the business, and their instincts are good. I worried what would happen if this wasn't done right, if the whole thing blew up."

Gmunder, though, kept pushing. In April, she gave her boss new evidence of the need for change: The company was on a path to spend $100,000 in 2010 for the privilege of keeping materials and packaging stored in more than a dozen rented tractor-trailers that were clogging the parking lot. Cinque was shocked. It was a cost on which no one, including he, had ever focused. At about the same time, Cinque had his chief technology manager walk him through detailed printouts that explained how information would flow through the MRP system, from sales to ordering to production. "The more I learned, the more I realized this was the right thing for the business," Cinque says.

The Decision Even so, Gmunder was still encountering obstacles. She was unable to get information from many people to create a mockup of how the system would work. Some managers were coming late to meetings or simply skipping them. In May, Gmunder came to Cinque's office to complain about the lack of cooperation. By then, all the financial figures and his own growing comfort with how the system would work had convinced Cinque that the MRP system was worth the risk. Of the warnings raised by managers such as Haug and Renna, Cinque says, "I have a lot of confidence in these people, and each one had raised a valid point. But I'm a strong believer in technology, and I knew this company had to continue to reinvent itself."

There was just one problem. Cinque had never really tried to sell the idea directly to his team. In fact, he had accomplished exactly the opposite by signaling his own early doubts about it. That, he realized, needed to be fixed. In a meeting with Haug, Renna, and others who had been critics of the plan, "I talked about various things we've done over the years that at the time we looked at as an impossibility," Cinque says. "I asked, 'What has happened to us now? Have we become lazy? Why, when we have a new challenge to change and improve our business, are we all of a sudden scared to do it?' "

Within a couple of days of that May meeting, Gmunder formed a 10-member team to lead the MRP project. The team meets for two hours every other week. Smaller groups meet more frequently. The plan is to run the new system parallel to the existing process before switching over completely to MRP in the spring.

Even now, though, there are many who aren't sure the company is on the right path. "Am I 100 percent behind it? Yes," says Haug. "Am I 100 percent convinced it will work? No." Even Cinque sounds as if he is still trying to convince himself he has made the right decision. "This is a big change in the way we do business," he says. "It's a leap of faith. But we have crossed the line now, and there's no turning back."

The Experts Weigh In

Get your people on board
This is not atypical for CEOs. The leader has to first get convinced this is the right thing to do. Next, he has to sell the need for change, and then he needs to make the change. You can study and evaluate it with a small number of people first. But once you give people a chance to say no, they will say no. I have always told my employees that there is a wolf at the door. There is not a business in the world that can operate inefficiently for too long these days. There's always someone ready to eat your lunch.

Lawrence Bossidy
Former CEO, Honeywell International
Ridgefield, Connecticut

Listen to everyone's ideas
The CEO needs to be doing the communication on this change and doing it early. Cinque shouldn't have left it up to his vice president of operations. He needs to communicate that everyone at the company is in this together and that even his job will change. Too often, leaders say they want input from employees, but then they don't set up mechanisms for soliciting that input. It is critical that employees have a chance to give their views. When it comes to a big change like this, there should be companywide meetings and town halls. If employees see their fingerprints somewhere on the plan, they feel they have some ownership of it.

Lisa W. Hershman
CEO, Hammer and Company
Cambridge, Massachusetts

Address employees' fears
Whenever a change effort comes from the top down, there is compliance at best or resistance at the worst, which is what happened here. You need to find advocates inside the company for change, because we are more persuaded by peers than by management. Cinque should have built a team of peer-to-peer advocates. At the same time, he should have examined the predictable concerns people would have, namely: What does it mean to me, and what could I lose? Unless people can see themselves operating successfully after the change, they will resist it.

Patricia Zigarmi
VP, Business Development, Ken Blanchard Companies
San Diego

IMAGE: Joao Canziani
Last updated: Dec 1, 2010




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