Network planning models reveal cost-saving opportunities for dairy company

Client background

The client is a middle-market dairy company producing and distributing raw milk and dairy products to multiple regional markets. With a long history in the industry, the company has built a reputation for quality and reliability. Like many food and beverage companies, it faced mounting pressure to operate more efficiently, particularly in how its supply chain was managed. Leadership recognized that tools such as network planning models could provide deeper insight into operations and guide smarter investment decisions.

Business challenge

The company’s transportation costs had been steadily increasing, creating a drag on profitability and raising questions about how best to manage raw milk distribution. Since raw milk must be transported quickly and often over long distances, inefficiencies in routes and logistics had a significant impact on operating costs.

At the same time, the client was feeling broader market headwinds, including price volatility, seasonal fluctuations in production and shifting customer demands. To address these pressures, leadership considered a major capital investment: the development of a new Greenfield processing plant valued at more than $10 million.

The proposed plant was expected to reduce transportation costs by bringing production closer to key markets and adding value to raw milk sold in separate regions. However, the decision carried substantial financial risk. If the new facility failed to deliver savings, it would not only strain operations but also create debt service obligations without the cash flow to support them. The company needed clarity before moving forward.

Baker Tilly approach

Baker Tilly guided the client through an evaluation of the project using advanced network planning models. The objective was to provide a realistic view of current costs and simulate future scenarios to assess whether the new facility would deliver the expected benefits.

• Comprehensive data review: Baker Tilly gathered farm-to-plant truck movement data over the course of a year, capturing seasonal shifts and daily variability. This provided a detailed baseline of how milk was transported across the client’s network.
• Integration of growth forecasts: The models incorporated the company’s projected growth, ensuring that future demand and capacity changes were reflected in the analysis.
• Scenario-based siting evaluation: Multiple site selection strategies were evaluated for potential plant locations, with each scenario tested against the models to analyze its impact on haul costs, supply chain efficiency and long-term viability.
• Consideration of industry-specific dynamics: Dairy production is seasonal, and the team accounted for these fluctuations to ensure that results were realistic and applicable to the client’s operations.

The use of network planning models provided leadership with an evidence-based framework for decision-making. By quantifying the true costs associated with each potential plant site, Baker Tilly gave the client a clear picture of whether the capital project would deliver on expectations.

Business impact

The findings were unexpected but critical. Rather than lowering costs, every siting scenario projected an increase in transportation expenses. The analysis showed that building the new plant would generate negative cash flow in all cases and leave no room to service new debt.

While this conclusion meant shelving the proposed investment, the impact was ultimately positive. Baker Tilly’s work saved the company from pursuing a capital project that would have weakened its financial position. By uncovering these insights early, the client was able to redirect resources toward other initiatives with stronger returns, such as operational improvements and market expansion strategies.

In addition to the financial savings, the project reinforced the value of data-driven decision-making. By applying network planning models, the company gained a clearer understanding of its supply chain and identified areas where incremental improvements could drive efficiency. The engagement also built confidence among leadership that future investments could be evaluated more rigorously, reducing the risk of costly missteps.

Conclusion

For middle-market food and beverage companies, large capital projects often appear to promise efficiency gains. But without rigorous analysis, those investments can introduce new risks and unintended costs. This case illustrates the importance of leveraging tools like network planning models to evaluate projects before committing resources.

By modeling different scenarios, testing assumptions and grounding decisions in real data, companies can avoid financial pitfalls and focus their capital on the initiatives that truly support long-term growth.

With Baker Tilly’s guidance, this dairy company not only avoided a multimillion-dollar setback but also strengthened its approach to strategic planning. The result was a more resilient business, better equipped to navigate market challenges and pursue opportunities that align with its financial and operational goals.