Avon 2010 Annual Report Download - page 34

PART II
We continue to implement a Sales and Operations Planning process that is intended to better align demand plans with our supply
capabilities and provide us with earlier visibility to any potential supply issues.
Enterprise Resource Planning System
We are in the midst of a multi-year global roll-out of an enterprise resource planning (“ERP”) system, which is expected to improve the
efficiency of our supply chain and financial transaction processes. We began our gradual global roll-out in Europe in 2005 and have since
implemented ERP in our European manufacturing facilities, our larger European direct-selling operations and in the U.S. As part of this
continuing global roll-out, we expect to implement ERP in other countries over the next several years leveraging the knowledge gained from
our previous implementations.
During 2008, we worked to improve the effectiveness of ERP in the U.S. and began to implement in the other markets within North
America, as well as in some smaller European direct-selling operations. In Latin America, we plan to implement modules of ERP in a gradual
manner across key markets over the next several years.
Zero-Overhead-Growth
We have institutionalized a zero-overhead-growth philosophy that aims to offset inflation through productivity improvements. These
improvements in productivity will come primarily from SSI and our restructuring initiatives. We have defined overhead as fixed expenses such
as costs associated with our sales and marketing infrastructure, and management and administrative activities. Overhead excludes variable
expenses within selling, general and administrative expenses, such as shipping and handling costs and bonuses to our employees in the sales
organization, and also excludes consumer and strategic investments that are included in selling, general and administrative expenses, such as
advertising, RVP, research and development and brochure costs.
Restructuring Initiatives
2005 Restructuring Program
We launched our original restructuring program under our multi-year turnaround plan in late 2005. We have approved and announced all of
the initiatives that are part of the 2005 Restructuring Program. We expect to record total restructuring charges and other costs to implement
restructuring initiatives under this program of approximately $519 before taxes. Through December 31, 2010, we have recorded total costs
to implement, net of adjustments, of $513.7 ($3.2 in 2010, $20.1 in 2009, $59.3 in 2008, $157.5 in 2007, $217.1 in 2006 and $56.5 in
2005) for actions associated with our restructuring initiatives under the 2005 Restructuring Program, primarily for employee-related costs,
including severance, pension and other termination benefits, and professional service fees related to these initiatives.
The costs to implement restructuring initiatives during 2005 through 2010 are associated with specific actions, including:
• organization realignment and downsizing in each region and global through a process called “delayering,” taking out layers to bring
senior management closer to operations;
• the phased outsourcing of certain services, including certain finance, information technology, human resource and customer service
processes, and the move of certain services from markets to lower cost shared service centers;
• the restructure of certain international direct-selling operations;
• the realignment of certain distribution and manufacturing operations, including the realignment of certain of our North America and Latin
America distribution operations;
• the automation of certain distribution processes;
• the exit of certain unprofitable operations and product lines; and
• the reorganization of certain functions, primarily sales-related organizations.
Actions implemented under these restructuring initiatives resulted in savings of approximately $350 in 2010, $300 in 2009, and $270 in
2008. We expect to achieve annualized savings of approximately $430 once all initiatives are fully implemented by 2011-2012.
2009 Restructuring Program
In February 2009, we announced a new restructuring program under our multi-year turnaround plan. We have approved and announced all
of the initiatives that are of the 2009 Restructuring Program. The restructuring initiatives under the 2009 Restructuring Program focus on
restructuring our global supply chain operations, realigning certain local business support functions to a more regional basis to drive