Manufacturing Transformation Strategy

By January 28, 2018Strategy

Client

Leading $3.5 Billion transportation equipment manufacturer.

Business case

The client needed a turnaround plan that would reduce costs and improve declining profitability in their manufacturing operations.

Scope

Understanding client’s North American manufacturing footprint

  • Developing manufacturing transformation strategy
  • Reducing variable cost by 20%
  • Reducing fixed cost through plant consolidations

Background

Over the years the client made several acquisitions scattered across North America. This led to non-standardized manufacturing processes and footprint leading to higher cost base. Higher costs created intense low margin pressures in a highly cyclical and commodity industry, where large portions of business is won on price competitiveness.

Solution

Developed 3-year manufacturing restructuring plan that would:

  • Reduce fixed cost base by $100 million.
  • Reduce product variable assembly cost by 36%.
  • Reduce overall lead times by 25%.

Approach

Our team’s approach:

  • Manufacturing Strategy – Understanding manufacturing volume patterns, product profit margins, required supply base, end shipping points, and product configurations, overall manufacturing strategy was developed which defined which products should be made at which locations and locations that should be consolidated. This led to bringing in higher volumes in many of the underutilized manufacturing locations, driving higher cost absorption and profitability improvements through leveraging fixed cost. Several facilities were phased out as a part of this consolidation reducing costs along the way.
  • Buy Vs Make – Developed overall buy Vs make strategy. Defining what are core and strategic value-add operations the client should be doing in-house Vs outsource. Developed centralized purchasing strategy for raw materials to drive purchase price down through consolidated buying.
  • Automation Strategy – Developed IIoT based automation strategy to automate assembly operations through overall automation strategy. This drove down costs and increased product reliability through standardized processes.

Results

3-year manufacturing restructuring plan that would:

  • Reduce fixed cost base by $100 million
  • Reduce product variable assembly cost by 36%
  • Reduce overall lead times by 25%

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