Tyson Foods 2001 Annual Report Download - page 17

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synergies
Early in the integration of Tyson Foods and IBP, team
members from both companies were asked to identify
the areas where the new company could operate more
efficiently and save money over the course of three years.
CONSOLIDATED PURCHASING
Combining Tyson Foods and IBP created economies of
scale that offer the greatest opportunities for synergies.
Tyson will be able to negotiate new lower total cost of
ownership for supplies purchased in huge quantities,
including items such as the plastic film products are
wrapped in, the corrugated boxes they are shipped in
and the labels that go on those boxes.
The Company produces enormous quantities of products
that are all wrapped in plastic and shipped in boxes.
IBP’s Foodbrands America division alone – a unit with
half the sales of Tyson Foods before the merger – spent
as much on those items as all of Tyson Foods last year.
Tyson’s new size and scale is having an immediate
impact on purchasing power.
GENERAL AND ADMINISTRATIVE
By combining shared services such as human resources,
accounting, information technology and others,
Tyson can achieve synergies. Not only are these areas
being combined for Tyson and IBP, but also for IBP’s
Foodbrands America division. Foodbrands was the result
of 16 companies acquired over four years, and those
staff functions had not yet been integrated into IBP.
So in effect, combining Tyson Foods and IBP is equiva-
lent to combining two large companies and 16 smaller
ones, creating more opportunities for savings in shared
services. This situation had the added benefit of giving
senior management a larger group of people from
which to choose the best team members for the new
management team.
TRANSPORTATION AND LOGISTICS
The integration of supply chain resources will increase
service levels, responsiveness and custom capabilities
for customers while providing significant savings
through increased transportation and logistics efficien-
cies. Frozen and refrigerated distribution capabilities
will enable us to deliver combined beef, chicken and
pork loads for a single order on a single invoice. The
aggregation of all transportation loads will enable
more efficient truck routing for both internally and
externally carried loads. Looking forward, we hope to
increase the combined company’s customer capabilities
and pursue additional vendor managed inventory and
collaborative planning, forecasting and replenishment
opportunities.
By taking advantage of these synergy opportunities in
purchasing, general and administration and transporta-
tion and logistics, Tyson Foods expects to recognize
annual savings in excess of $200 million by 2004. We
will review our progress toward attaining these synergies
and search for other opportunities.
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