In the early 2000s it seemed that half the country went on the low-carbohydrate Atkins Diet, a fad that the American Italian Pasta Company felt immediately, says Kevin Hall, vice president for the supply chain and continuous improvement at AIPC. "It took away 20 percent of our market overnight, and our category lost more than 200 million pounds of demand," he says.
This was a shock to AIPC, an entrepreneurial company that had grown at a rate of 25 percent a year since its founding in 1988. "We didn't know how to respond," Hall says.
The rapid and unanticipated drop in demand lent a sense of urgency to the need for APIC to re-think its supply chain, but the company already had recognized the need to become more flexible and adaptive, says Hall. "From the time of our founding, our culture was one of individual contributions around a theme of just getting the job done," he says. "That does not lend itself to collaboration and coordination, which is what we realized we needed. It is like Darwin once said, it is not the strongest or smartest of the species that survive, but the ones that are most adaptable to change."
AIPC decided to adopt a lean business philosophy based on three basic tenets: aligning management around the company's processes, practices and principles; stabilizing the business with standardization; and to having one approach to problems solving.
"We studied with people at Toyota, because we wanted to understand their approach to Lean and apply those principles to our business," says Hall.
One change adopted by AIPC was to organize around value streams directed toward the customer rather than around functional areas. "We really worked to understand the strategies of our customers and then to deliver value as they define it," says Hall. "Anything that didn't deliver value was considered waste and we stopped doing it."
Cultural transformation is always difficult, Hall says. "The first thing we learned is people don't resist change, they resist being changed. So we had to shift our management style from one of command and control to employee empowerment." Hall says this was summed up in a saying that became something of a mantra: A boss has answers, a leader has questions. "We trained our managers to not go in and give answers but to ask questions until the employees came up with the best answers," he says.
In the first four years following this transformation project, AIPC doubled the size of its business. Its market value of $60m in 2006 grew to $1.2bn in 2010, which is the acquisition price paid by Ralcorp Holdings to acquire the company. "We basically created a billion dollars in value with this new cultural focus," says Hall. AIPC continues to operate as an independent division of Ralcorp. "Our margins were double any of their other divisions and they actually have since taken the philosophy to their cereal and frozen products divisions," he says.
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