Robin Dunleavy, director of corporate product development; B.K. Girdhar, Ph. D., vice president of research and development and quality assurance; and Christopher Hansen, executive chef, cook up customer-pleasing innovations in the test kitchen at OSI Group's Aurora, Ill., world headquarters.
Can a company actually expand its horizons by narrowing its focus?
While it seems counterintuitive, executives say this strategy is reaping major rewards for the OSI Group, Aurora, Ill.
Last year, OSI executives committed to continue to focus on what this company does best - working hand-in-hand with a core group of customers to create long-term, strategic partnerships.
“We are focusing on a select group of customers so we can understand their needs better and deliver more effective total business solutions,” says Lynn Mulherin, senior vice president of business development and commercialization. “In the past, we were trying to do too many things for too many customers - now we are focusing on our primary goal of being the best of the best with our core strategic customers.”
As a result of this greater focus, Mulherin says, “Our sales and operation process teams have been operating more efficiently as a collective group to deliver innovative, total value chain solutions. One of the benefits is that we have deepened our relationships with our core customers while expanding our business with other companies that know we can deliver long-term value for them.”
For the record, OSI’s customer base contains some of the most prestigious brands in the food industry. (see sidebar “A dream and a handshake”).
OSI, a foodservice and contract-manufacturer, processes and supplies poultry, beef, pork, fish, produce, pizza and other dough-based products for leading brands worldwide.
In the last 20 years, the company has seen its sales grow from $250 million to more than $5 billion, its product offerings broaden, its business grow through several acquisitions (most recently Amick Farms in November 2006), its customer base widen and its geography expand. In fact, the company now has more than 75 manufacturing locations worldwide - with operations in Asia, Australia, Europe, North America and South America.
Chairman and Chief Executive Officer Sheldon Lavin’s entrepreneurial philosophy has fueled much of this growth.
“OSI is an entrepreneurial company. It is not run like typical companies our size with dictates from the top,” says Lavin, a 37-year company veteran. “Yes, there are rules and strategies that align us with budgets and levels of responsibility, but we operate like a family. The culture is very different. It evolved because I believe it is the best way to do business and it has worked well for us over the years.”
Several of OSI’s executives cite the atypical structure, open communication policy and autonomy they are given to make decisions as some of the most attractive aspects of the OSI culture.
“Really the best thing about OSI is that it behaves like a small company,” says B.K. Girdhar, vice president of research and development and quality assurance. “We have the freedom to do what is best for our customers … Our goal is to grow and deliver business results consistent with out overall objectives. It’s a very productive approach to running a business.”
Partnership culture
This policy of autonomy and open communication doesn’t only apply to OSI employees - it extends to the company’s customer partnership relationships as well. OSI executives view customers as true business partners and consistently strive to foster open and long-term relationships with them.“Being a partner is really woven into the fabric of the company,” says Mulherin. “We work best when we are working as an extension of a company’s own research and development, manufacturing and procurement departments.”
Kevin Scott, executive vice president, likes to refer to this close customer-supplier relationship as a “virtual company” that combines a customer’s brand-building and marketing skills with the OSI Group’s product innovation, speed to market, quality and food safety systems, global infrastructure and financial flexibility. These types of partnerships create “long-term value for our customers,” he says.
This model has lead to many highly successful - and long-term - partnerships for OSI.
“If OSI is simply viewed in the traditional supplier mindset, then the customer is not capitalizing on the value of what our collective enterprise can provide - from raw material sourcing through product development and into commercialization,” Scott says.
This realization is what inspired the company’s recent actions and generated the OSI Group’s even greater focus on core customers.
Scott, an industry veteran who led several entrepreneurial businesses during his 18 years at Kraft Foods, Northfield, Ill., joined OSI two years ago. His experience and perspective served as a catalyst for OSI re-focusing on its core strengths.
“We grew very rapidly; sometimes you need to step back and reflect on what your strengths are - what distances you from the competition. Once these strengths are identified, you need to focus and align the organization to consistently deliver those benefits to your customers,” he explains.
Today, the impact of this renewed focus is reverberating throughout the organization. OSI is seeing both top line and bottom line growth and strengthening its relationships with some of the food industry’s leading brands.
“We’re very willing to invest to best serve our customers,” says Mulherin. “Being privately held, we can take a longer term perspective - correspondingly, our customer relationships need to be deep enough to warrant that perspective.”
Adds President and Chief Operating Officer Dave McDonald, “Partnering is an integral part of our heritage. We understand what it takes to be a partner. It’s working toward a mutual goal, not any one individual’s goal. It’s really a give-and-take process, not unlike a marriage. And it’s important to keep the long term goal in mind as you face day- to-day issues.”
Operations in order
This longer-term perspective also played a role in the recent realignment on the operations side at OSI.Before he was named OSI’s senior vice president of North America Operation, Dan Milovanovic held several different positions throughout his 19-year tenure at OSI. He has done everything from audits in accounting to traveling the world checking on assets from Australia to Brazil.
“What the reorganization has done is enable us to not only improve our focus, but to more efficiently effect change,” he says. For example, Milovanovic now is responsible for procurement, operations and engineering - while beforehand, each department was controlled by a different executive.
“We used to have several leaders managing certain aspects of the business. In order to gain the continuity we were looking for, and pull together the business approach, Dan’s broad experience made him a great fit to lead that effort,” explains Scott.
“We’ve evolved into more of a team-based approach,” he adds. “It’s more of a cross-functional team solving our problems in a more collective way.”
The team-based approach includes global process groups that champion ideas and best practice sharing companywide.
“Many global companies get disjointed from region to region. We’re continually looking to be as effective as we can be - operating as a global team,” Milovanovic says. “This ensures that the same kind of benefit we’ve achieved in each region can be achieved across the globe.”
This philosophy also extends to the company’s vast processing plant network.
Milovanovic explains, “I think the reason the plants have been successful is because they have been very entrepreneurial. … What this new structure has allowed us to do is keep the entrepreneurial spirit at the plants, but overlay that with a clear strategy and direction on how they’re to operate and link with our corporate group here in Aurora - a set of guidelines that they operate within. That’s been able to bring them all together and get a better collective benefit.”
Part of the new structure includes a worldwide extranet activated about a year ago. Each of OSI’s plants worldwide records key process indicators (KPIs) into the Operations Advantage System and the results are shared companywide. (For more about the benefits of the Operations Advantage System see sidebar, p. 10.)
Since many of the plants produce similar items, the opportunity to share ideas has been invaluable, Milovanovic says. The Operations Advantage System allows the company to benchmark each plant’s data in a standard format (all measurements are translated into a common language and metrics). This system encourages a competitive spirit - from which they all reap the benefit.
“We’re improving. Our yields are up. Our pounds per hour are up significantly. We’re seeing a general improvement in our KPIs and our new product commercialization process is more efficient than ever before with quicker overall turnaround times,” Milovanovic says.
And, he adds, the exchange of ideas is impressive. “These guys are calling each other and asking, ‘How are you getting those improvements?’ … We have a lot of that exchange going on.”
Global growth
This type of international exchange is what OSI hopes to see more of in the future. Deepening global penetration is principal among the company’s goals.“I’m most excited about levering our global scale,” McDonald says. “We are looking for and capitalizing on global supply chain opportunities. We’re focusing on flexible sourcing. We have people in many of these [international] geographies, so we’re not depending on contacts outside of our organization. We really can look at our own directory and call our own folks and really capitalize on their presence in the market.”
OSI’s partnering philosophy especially is key in international markets. Here, the company looks for companies or individuals familiar with the local market to partner with.
“We believe that the local presence really leads to local solutions. Living in the market, living where our customers are gives us the opportunity to deliver value to them,” McDonald says.
He points to recent success in the expanding Russian market as evidence.
“That’s a very exciting market for us. The economy and marketplace in Russia is growing at an astronomical pace,” he says and adds that, “The momentum in China and India is tremendous as well.”
Perhaps the most remarkable aspect of OSI’s international operations is how much collaboration takes place between the company’s locations.
“Our local partners really have the opportunity to take advantage of the rest of the organization in terms of size, scale and geography. We’re getting much better at allowing them to have these local solutions but giving them the advantage of a global organization,” McDonald says. “For example, we’ve sourced onions from India, considered processing them in China to be marketed in the U.K.”
This type of creative sourcing-supply chain-processing solution is what OSI plans to create more of in the future.
“We’ve got some creative solutions on sourcing beef globally. We may be supplying from Latin America but when currencies change or supply/demand issues create other opportunities, we can quickly switch to Australia or other locations. We’re sourcing poultry out of Latin America for many of our European customers today. … There’s really no static solution, every day an opportunity needs to be evaluated reflective of the current market conditions. We capitalize by being able to move quickly,” McDonald explains.
Keeping tabs on global activities has OSI executives frequently flying. Any given week could find Girdhar accompanying Scott on a sales call in China or McDonald and Milovanovic visiting production facilities in Australia.
“I need to know what we are doing in Brazil, what we are doing in India and what we are doing here in the U.S.,” says Girdhar.
But even when executives can’t be there in person - today’s technology allows them to easily consult with OSI’s locations around the world. Girdhar relies on the expertise found at OSI’s R&D facilities in China, Taiwan, Philippines, India, Latin America, Australia and Europe.
“If I don’t know the answer [to a customer’s request], I contact all my counterparts across the globe. … I’ll send an e-mail and within four hours I’ll get five or six leads,” he says. “We don’t know everything, but we’re smart enough to know where to go to find out.”
This wealth of global product knowledge and the speed to market is one of OSI’s competitive advantages, he says.
Adds McDonald, “What we’re discovering is that our customers are looking for global solutions. Just sourcing in the U.S. for our U.S. customer is no longer adequate. We have to give them a range of solutions - whether it’s fixed price offering or sourcing and the value that can create for them. There really is a growing expectation that they need to compete on a global level.”
Accordingly, OSI plans to provide more global solutions in the future.
“Every one of our locations tends to have growth and profit goals, which collectively add to a global aspiration,” McDonald says. “Besides our culture of partnering - we have a growth culture. You want to be stretching yourself all the time.”
Scott, for one, feels strongly that OSI’s virtual company platform is what will lead the company into the future. He concludes, “I believe the future is all about the virtual companies we create through partnering. In other words, we take the best of what our customers can bring, combined with the best of what we bring and we work seamlessly together. We can create possibilities that were not even on the horizon before - that’s exciting.”
AT A GLANCE
OSI IndustriesName:OSI Industries
Headquarters: Aurora, Ill.
Top executive: Sheldon Lavin, chairman, chief executive officer
Profile: Global leader in foodservice and contract-manufacturing with 75 operations worldwide and more than 22,000 employees
Products: Prepared beef, pork, poultry, non-meat, vegetable and fish products; pizza; chili and stews; extruded and enrobed entrees; fruit and cheese-based products.
A dream and a handshake
Answering the call of customer demands has been a hallmark of the privately-held OSI Group’s business since its inception as a Chicago butcher shop. Started in 1909 by German immigrant Otto Kolschowsky, the family-owned business grew into Otto & Sons, a regional supplier by 1928. Years later, in 1955, a handshake agreement with another Chicago-based entrepreneur, Ray Kroc, had OSI supplying hamburger patties to Kroc’s new McDonald’s restaurant chain.This agreement led to OSI Industries (as it was known by 1975) growing right along with McDonald’s - expanding geographically and adding to its offerings. In the late 1970s, under the guidance of current Chairman and Chief Executive Officer Sheldon Lavin, OSI went global by moving into Germany followed by Asia and South America.
Today, the company (renamed OSI Group in 2004) processes beef, poultry, pork, produce and bakery items to the tune of more than $5 billion per year. McDonald’s, OSI's largest customer, remains an important partner while the company now serves the needs of several other of the world’s leading foodservice and retail brands.
The partner perspective
Answering the call of customer demands has been a hallmark of the privately-held OSI Group’s business since its inception as a Chicago butcher shop. Started in 1909 by German immigrant Otto Kolschowsky, the family-owned business grew into Otto & Sons, a regional supplier by 1928. Years later, in 1955, a handshake agreement with another Chicago-based entrepreneur, Ray Kroc, had OSI supplying hamburger patties to Kroc’s new McDonald’s restaurant chain.This agreement led to OSI Industries (as it was known by 1975) growing right along with McDonald’s - expanding geographically and adding to its offerings. In the late 1970s, under the guidance of current Chairman and Chief Executive Officer Sheldon Lavin, OSI went global by moving into Germany followed by Asia and South America.
Today, the company (renamed OSI Group in 2004) processes beef, poultry, pork, produce and bakery items to the tune of more than $5 billion per year. McDonald’s, OSI's largest customer, remains an important partner while the company now serves the needs of several other of the world’s leading foodservice and retail brands.
Fair Oaks Farms, a processor of fully-cooked pork sausage and bacon saw more than $200 million in sales last year - but the company has access to the engineering expertise, financial relationships and operating capabilities of a more than $5 billion dollar company. That’s because Fair Oaks, Pleasant Prairie, Wis., has a close partnership arrangement with OSI Group, Aurora, Ill.
Mike Thompson is Fair Oaks Farms president, chief executive officer and majority owner. “Being able to utilize OSI’s expertise as global manufacturers and their extensive experience in the number of items they process helps me as I look at the expansion of my company,” he says. “Their knowledge base is one of the best in the entire industry. It aids my company to be able to lean on them for that kind of expertise. We create synergies for each other."
With OSI as a partner, Fair Oaks has grown into one of the largest producers of cooked pork sausage and bacon in the U.S., Thompson says. In fact, last year Fair Oaks acquired a second processing facility in Pleasant Prairie - doubling its manufacturing space from 60,000-square feet to 120,000-square feet (Fair Oaks also processes some product at OSI’s Chicago and Oakland, Iowa, plants).
Thompson, who worked for McDonald’s for more than 20 years before becoming Fair Oaks CEO, has seen revenues more than double since he took over the company. Fair Oaks processes product for foodservice and retail private label, and also exports pork sausage to both Canada and Japan.
While Fair Oaks has counted OSI as an investor partner since it began in 1984, Thompson says OSI has remained true to their long-held entrepreneurial operating philosophy.
“As the majority owner, I have total freedom to run my organization. They are there to help and support, but I’m accountable for the business and have total operating control,” he explains.
And the arrangement seems to be working to everyone’s advantage. In the five years since Thompson has been owner, Fair Oaks has seen record gains, earned new customers and been honored with several awards - including McDonald’s Target supplier for pork sausage and bacon as well as the U.S. Department of Commerce’s Minority Business Development Chicago MED Regional Export Firm of the Year.
Thompson says he expects the future to hold more of the same.
“My goals are centered around improving operations, growing with our existing and new customers and broadening our capabilities and product offerings,” he says.
An "extra" tool
Last year, the OSI Group, Aurora, Ill., installed an extranet - known as the Operations Advantage System - in order to compare and share key process indicators at its 74 plants worldwide.“Each plant logs in its own numbers,” explains Dan Milovanovic, senior vice president of North American operations. “The numbers are comparable, so we can benchmark them. You can pick whatever plant you want, whatever product type you want and create charts and graphs on plant productivity, quality, field service programs, etc.”
When a plant in Germany that produces battered and breaded products suddenly started recording no wasted soy oil used for frying, operations executives knew something was up.
“We couldn’t figure out what they were doing different,” Milovanovic says. “It turns out that they had developed a special filtration system, and because the plant had been reporting their numbers into the extranet system, the difference was shared worldwide.”
“Now five of our other plants were able to incorporate that filtration system,” Milovanovic says. “And we’re realizing significant savings. This would have taken a lot longer, if we didn’t have this global platform. By comparing oil usage, we were able to quickly implement this new best practice.”
While an atmosphere of sharing existed before, Milovanovic says, the extranet helps each individual plant manager remove its “blinders” and think about the network as a whole.
