Oregon Freeze Dry

Developing a Competitive Edge using the TOC Distribution Solution.

BACKGROUND

Oregon Freeze Dry (OFD) works in removing water from different products at low temperatures and pressure. They sell finished products and freeze-dry goods in the following areas:

• Food products: ingredients, private label meals, backpacking foods (their own Mountain House brand), and government rations
• Non-Food products: heat, oxygen, shear-sensitive materials, microbials, pharmaceuticals, nutraceuticals, and chemicals

The story began with OFD's attempt to get a large consumer package goods company (Company X) to renew a contract for one of the ingredients that OFD makes. In March 1997 an OFD executive attended an External Constraints Course at the Goldratt Institute to develop an unrefusable offer to make to Company X.

In order to address inventory and distribution issues in the offer to Company X, OFD participated in a dedicated 2-Day Distribution Workshop as well.

nfortunately, the offer made by OFD to Company X was refused, but the story does not end here. OFD decided to implement the TOC Distribution Solution in their Mountain House division.

RESULTS

Results Achieved in Mountain House after the implementation of the TOC Distribution Solution:

Course Taken: March 1997
Implementation in Mountain House division: began March 1997

• Reduction in late shipments due to out-of-stocks:
  7/96 - 10/96: 1164 shipments; 245 late (21%)
  7/97 - 10/97: 1697 shipments; 11 late (0.6%)
• Value of finished goods inventory maintained at hundreds of thousands of dollars less in 1997 than in 1996 (a 60% reduction; in 1998 expected to be an 80% reduction)
• 20% increase in sales

After seeing the success in the Mountain House division, OFD's Ingredients division implemented the TOC Distribution Solution beginning in July 1997.

Results in the Ingredients division from 7/97 - 10/97:

• 21% reduction in finished goods
• On-time deliveries increased from 97% to 100%
• More than a 50% reduction in make-to-order lead time

DESIRABLE EFFECTS

The desirable effects resulting from the implementation of TOC Distribution at OFD include:

• lower inventories
• improved on-time shipments
• fewer production mistakes
• less wasted time (no more "What should we make, when should we make it?")
• much faster reaction time to changes in demand
• competitive advantage (the industry norm is "out-of-stocks" and "back-orders")
• contributed to 20%+ sales increase.

And...after achieving success internally, OFD has begun reworking its "unrefusable offer" to Company X to present to its new general manager.