Driving market focused resource allocation decisions

The issue

  • A business unit of a global speciality chemicals producer supplying catalysts for industrial applications to multiple markets across all geographies
  • Capacity constrained and being challenged to improve overall business profitability
  • Shared manufacturing assets serving multiple market-facing business units
  • Upcoming regulatory changes required product recipe changes with implications on the existing production process
  • Limited attempts to address supply constraints in an effective manner, with over-stated demand and poor sales & operations planning disciplines

Solution

  • Establish & exploit true production capacity of existing assets:
    • Identification and elimination of bottlenecks in supply chain & productions
    • Drive for OEE in existing plant (batch size & sequencing, down time & maintenance etc.)
  • Identify options to reallocate capacity use to more profitable customers
    • Identification of customers & volumes yielding below average contribution allowing for either renegotiation or re-allocation
  • Establish cross-market segment view of long-term demand
    • Markets & functions created fact base & presented in facilitated cross functional sessions to build cross markets view & build priorities for overall business
  • Revamped S&OP including product profitability of prospect pipeline to ensure capacity is utilised for highest financial returns

The results

  • CAPEX spend avoidance of £18m with extrapolated implications to the whole division of c. £100m
  • Improved joint-management understanding on the levers of capacity & profitability, supported by a cross-market decision making governance process to make data based trade-offs
  • Increased production capacity through de-bottlenecking (e.g. batch sequence & maintenance optimisation) with potential resulting contribution uplift of ~ £ 10m p.a.
  • 235 tonnes of unlocked capacity through selective elimination of low margin product variants and Sales re-alignment

An award-winning team

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Delivering greater procurement efficiencies for a construction company

The issue

  • £1billion division split into 6 semi-autonomous business units, spending £450m per annum on materials and sub-contracted services
  • Each business unit under revenue and margin pressure especially those dependant on public sector work
  • By re-establishing good procurement practices  a modest 3% savings target was agreed upon, the stretch being that the full cash saving had to be delivered in-year
  • No single picture of procurement spend or performance compared to the external market
  • Procurement & supply chain savings were already baked into business unit budgets and there was pressure from plc to deliver over and above this

Solution

  • Created a definitive ‘spend cube’ and with it a single set of numbers
  • Completed a top-down and bottom-up analysis of spend at the detailed category/supplier level and agreed impactable spend
  • Created and executed a prioritised implementation plan closely monitoring and recording the benefits as they are realised
  • Redesigned the P&SC organisation bringing in the necessary skills and expertise as required

The results

  • In-year cash savings of £8million with an exit run rate of £10million per annum
  • New operating model fully installed and driving benefits (sustainability)
  • Benefits fully traceable within business unit P&L

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Operational excellence at a key site for a marine engineering products division of a global organisation

The issue

  • An engineering, fabrication & assembly facility supplying deck machinery equipment to the marine industry, was severely underinvested in, with old facilities & equipment and remote from Group HQ
  • Seen as a failing site with internal customers losing trust in its ability to deliver
  • Disconnected planning and production functions causing late delivery and high costs
  • No effective performance management system in place to drive improvements
  • Very high inventories due to a lack of control of demand and production priorities
  • Intention to transfer products in from Scandinavia and establish a low-cost supply centre of excellence

Solution

  • Evaluation of the primary issues and development of a site transformation plan
  • Focused on OTIF as the critical performance metric; established cross-functional planning with short interval control to manage demand and delivery to promise
  • Improved data integrity, reset planning parameters and re-established ERP system use
  • Re-organised operations to improve flow through the factory and to establish schedule adherence
  • Implemented practical lean operational disciplines centred around PDCA
  • Addressed excess inventory, control of stock, kitting and warehousing operations
  • Established effective performance management across all functions
  • Coached management to develop capability and establish sustainable improvement

The results

  • Delivery performance improvement OTIF from 14% to 95% within six months
  • 45% reduction of inventories within one year
  • Jump in recovered factory revenues from effective demand management & increased delivery to commitments
  • Engaged and productive workforce with a clear understanding of what was required of them
  • Successful capital upgrade completed while continuing to supply
  • Site was established as a Centre of Excellence for deck machinery and achieved Group award for excellence
  • Asked to repeat a similar exercise at another site in the Far East

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Delivering business turnaround

The issue

  • The UK business of a global construction materials manufacturer had been losing money for several years due to inefficient operations and declining sales in an industry sector experiencing extremely challenging times.
  • A full business review and improvement plan were required to stabilise the business and address the financial performance.
  • Significant cost reduction efforts had already been made to offset the declining sales and lower margins, but the business was continuing to lose money.
  • Sales lacked the basic tools and capabilities to compete effectively and operations were poorly managed resulting in over-production, an inefficient organisation and poor working practices.
  • The leadership team was highly dysfunctional and lacked the capability to define and execute a plan to address the situation.

Solution

  • Undertook a full situational analysis of the business operations and identified changes required to reverse the performance trend
  • A comprehensive change programme was designed and implemented with the full involvement of the business management team
  • Recognising that the current actions were primarily to address the initial objective of eliminating the business losses, a parallel stream of work focused on the market and development of the future strategy for the business
  • This dovetailed with the reorganisation of the commercial functions and outlined the business’s future journey to go beyond a break-even situation and achieve acceptable returns

The results

  • The programme had a significant impact on the business across all areas of the value chain and delivered a sustainable bottom-line improvement of over £5m p.a in 12 months.
  • In addition to the delivered cost optimisation actions the re-focusing and capability development work with the sales team secured a contract renewal with three principal customers and the acquisition of a new major account and stemmed the loss of any further business.
  • The new ways of working that focus on using sound management information to run the business and to action issues have taken root across the organisation. Decision making improved and continuous improvement is becoming established.
  • The Group Executive sees the step change in performance that was achieved in the timeframe as the most successful intervention of its kind across the portfolio in recent years.

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Applying lean principles to a deliver a step change in performance in a construction environment

The issue

  • Over a year behind plan due to technical difficulties and the inability to establish an effective delivery model
  • Significant efforts were made to find a workable engineering solution but continuing to fail in meeting planned delivery cycle times
  • Accruing significant non-recoverable costs on extending leases of expensive marine engineering plant
  • Accepted reality that most delays were either due to weather or one-off events and therefore non-addressable
  • Reliant on experienced agents, managers and foremen to manage communication without the need for much structure or formality
  • The aim was to achieve a repeatable 14-day ‘production’ cycle, from a starting point of 19 days as the demonstrated best achievement

Solution

Working with the project team to identify and implement:

  • An optimal production process with defined task times against which the project could plan, execute and measure performance
  • Introduction of cross-functional short-range planning discipline to improve visibility and reduce the instances of unplanned stoppages through poor communication and lack of coordination
  • Strengthening the cascade communications to the front-line teams to ensure the right plan was being executed
  • Prioritisation of the process improvement pipeline to accelerate the implementation of the highest impact solutions
  • Establishing adherence to a standard process and course-correcting back to the agreed sequence if unplanned events caused the deviation
  • Previously each cycle had effectively been ‘bespoke’
  • Using close monitoring to highlight avoidable downtime and to identify operational fixes, e.g deck layout standardisation

The results

  • Cycle time was compressed to less than the on-target 14-day sequence on a sustained basis, and as low as 10 days, with associated cost savings of ~£0.5m per cycle.

Having the Curzon team ‘embedded’ within the project proved effective in understanding the complexities and challenges of the operating environment. Pragmatic and tailored interventions and a ‘test and learn’ approach encouraged adoption and ownership.

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Business performance turnaround for a multi-country division of a global building products group

The issue

  • LATAM division of a €3bn global construction product manufacturing & distribution group
  • Country-based business units in 14 geographies from Mexico to Chile with 3,500 staff generating revenues of €400m
  • A sustained period of under-performance with operating margins at sub-3% making it the worst-performing division in the Group
  • Divisional layer not adding any value with local businesses being left to operate independently, some with more success than others
  • An extended analytical diagnostic by a global consulting firm had established the scale of the problem, but no credible and accepted plan to address the issues had emerged
  • The need was for pragmatic help to make change happen with the full buy-in of local management

Solution

Plan and mobilise stage

  • Confirm the scale of the improvement opportunity
  • Agree targets and align with budgets to have one set of numbers
  • Create a plan and a governance model to balance top-down coordination with full engagement from the business units

Delivery stage

  • Initial focus on four of the largest markets where impact potential was greatest
  • Reduction in margin leakage through pricing optimisation, product mix & discount control
  • Introduction of operational excellence basics across manufacturing facilities
  • Inventory optimisation, including clean-up of obsolete and slow-movers
  • Reduction of corporate overhead layer and leverage of shared service centre to reduce in-country costs
  • Capability development of management and teams across all disciplines

The results

  • The Division was transformed from worst to best performer in the Group within 12 months
  • Operating margin tripled and accrued benefits delivered were 45% above the programme target
  • Working capital was reduced by €25m
  • The change management effort involved over 1,000 staff across all functions and businesses
  • Awarded ‘Best International Project’ by the UK Management Consultancies Association
  • Curzon entered a risk-reward commercial arrangement on benefits delivered

We wanted a step change in performance, done in a way that would build capability to make it sustainable… the results speak for themselves.  – Divisional CEO

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Lean value chain analysis and design for global precision engineering products leader in aerospace industry

The issue

  • A complex multi-stage casting, machining and coating operation manufacturing precision components for the aerospace industry
  • Underperforming organisation and low levels of ownership for improvement
  • Extremely low velocity through the process, with poor yields and excessive scrap
  • High inventories of work in progress and finished goods
  • Production measures encouraging over-production
  • Silo mentality in operations exacerbating the WIP situation
  • Disaffected workforce with little interest in driving continuous improvement and no effective performance management in place

Solution

  • Analyse the current situation to articulate the operational improvement potential (yield uplift and inventory reduction)
  • Create the business case for change (P&L and cash impact)
  • Design a pilot to create an integrated supply chain for the largest volume product including suppliers and JV partners
  • Detail design of a pull model and elimination of WIP stages along the entire supply chain
  • Re-design of the layout and organisation to separate ‘dirty’ and ‘clean’ operations to reduce rework
  • Launch of a continuous improvement approach within the shop floor to tackle scrap, rework and productivity issues
  • Design and introduction of a cascaded performance management framework

The results

  • 40% reduction in inventory identified through WIP elimination
  • The feasibility of a 50% reduction in production lead time confirmed
  • 10 percentage-point improvement in yield performance from closer process control
  • Plan to deliver £5m savings in-year agreed
  • Changes to ways of working implemented in pilot cells with Lean work-flow approach trialled
  • Programme of Lean training and continuous improvement projects implemented
  • New KPIs are being used to drive the performance of the value chain in place of traditional cost absorption metrics

An award-winning team

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smart manufacturing

Re-assessing cost after COVID-19

30th July 2020

The global COVID-19 pandemic has provoked the need for businesses to re-assess their footprint and cost base across the supply chain. John Mason, Manufacturing & Engineering Services Partner at Curzon Consulting, considers the case for structural change.

Re-assessing cost after COVID-19

The COVID-19 crisis has altered the landscape for many. Some have already acted to reduce staff numbers and consolidate operations as an initial response to falling revenues. Structural change and a lower cost base may be required to adapt for the longer term driven by:

  • Altered demand volumes, market location and mix of products and services as markets and the customer base evolves
  • New regimes to protect health and wellbeing that change how people can work
  • The increasing de-globalisation trend, prompting a re-think on the resilience of supply chains and moves to localise

The scenarios and options for each business will be different and the ‘best fit’ answer will not necessarily be obvious.

Considering the case for structural change

Supply-side capacity

  • What capacity is needed now and for the medium term? Can excess capacity be re-purposed to meet expected new demand or is consolidation possible?
  • Restructuring the footprint is an opportunity to deliver a step change in the cost base and renewed focal points for future investments

Network view

  • How fit for purpose are existing facilities now? Can a more cost-effective and resilient model be found by looking at the network as a whole?
  • Potential changes to both demand and supply-side environments will impact the economics of the current model and an holistic view is needed

Supply chain

  • Will customers demand more localised sourcing to reduce interruption risk in their business-critical supply chains? Is a pre-emptive move to adapt the footprint more attractive than a reactive one?
  • Sourcing and certifying new suppliers may be a critical dependency for re-locating production. It is also an opportunity to re-think make-buy strategies, secure new capabilities, strengthen key supplier relationships and unlock cost savings

Overhead right size

  • What opportunities from changed working practices should now be evolved to deliver a lower overhead cost model?
  • Remote working, greater comfort with and reliance on technology, and demonstrated operation with reduced indirect staffing levels creates new baselines for the operating model

Digital evolution

  • What opportunities are created through a reshaping of the footprint to accelerate adoption of digital technologies?
  • Relocation of capabilities to be better aligned with future demand will require assessment of products, processes, assets, resources and technology infrastructure. Introduction of technology to deliver cost and service advantage may be achieved in a more concentrated way, more quickly and with greater impact as part of a footprint reshape than through retrofit in a sub-optimal model

Affordability

  • How will transition be funded and what prioritisation is required? A balanced-risk business case and plan are needed
  • Parallel effort to drive out non-value-add activity, reduce working capital and target efficiencies in the current model will create additional headroom to manoeuvre

Having dealt with the immediate threat from COVID-19, executives, stakeholders and shareholders are now turning their attention to what comes next.

Businesses that are proactively considering the options now will be better placed to make the right moves to sustain and grow.

How we can help

We have broad experience of working with industrial clients to deliver higher levels of profitability and resilience by optimising the cost base, with managed risk and without compromising business value-add service delivery.

Our bespoke Assessment Model is a tried and tested approach balancing commercial, financial and operational considerations. We can rapidly examine the possibilities, frame the options and quantify the associated benefits and risks to underpin confident decision-making.

We bring a business-led focus, an insight-driven approach and a pragmatic attitude to help our clients make informed decisions. And where needed we assist in delivering the business case.

Curzon Consulting analytical framework cost optimisation
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building-site

Digitalisation in building supplies

8th June 2020

The global COVID-19 pandemic is changing customer behaviour across the UK. We explore the digitalisation adopted by many building supplies companies to meet new customer expectations.

Muhammad Ali, Curzon Consulting Principal, discusses the impact of coronavirus on customer expectations and digitalisation with David Young, Group CEO of The Bradfords Group. Bradfords is a leading independent Builders Merchants in the UK.

Watch the highlights of our conversation:

Changing customer expectations

Navigating supply and demand challenges brought about by COVID-19

David explains the challenges that the pandemic has created in the building supplies industry.

Initially, Bradfords’ shops remained open to support essential projects and self-employed customers. In March, the morning after the UK lockdown was announced, Bradfords experienced extraordinary levels of demand. They realised that although Bradfords had a number of social distancing measures in place, they wanted to create a new process to safely meet the rapid change in customer demand. They opened back up the next morning with a brand new process – to order either via phone and collect, or order through the website.

This generated “unprecedented demand on the phones”, increasing from around 1,500 calls per day to 15,000.  Consequently, both trade and retail customers looked to other channels such as the website. David explains

“we started seeing a big uptick in our trade customers using our portal and then transacting online, and also retail customers”.

However this surge in online demand came with a new set of supply chain challenges. Therefore, to ensure that Bradfords could continue to supply products for essential products and key projects they:

  • Temporarily closed their business to the retail customer base
  • Rationalised their product range

Furthermore, showcasing fewer products created a better website user experience which in turn generated an increase in sales. In fact, the eCommerce sales are still increasing, even now Bradfords have reopened their shops and yard to customers.

Are these changes in customer behaviour expected to continue?

In the short to medium term, this changing end user behaviour is expected to continue. Trends include:

  • Customers increasingly plan ahead
  • Customers continue to buy online
  • An increase in retail customers
  • A spread of footfall across the day, rather than a concentration of customers in the morning

“What COVID-19 has forced customers to do is plan ahead” David Young explains. Due to extended lead times and the click & collect service, Bradfords have seen their customers become much more planned. This change in behaviour is also helping operations “it helps us manage our workloads and forecasting stock levels”.

Building a strong ecommerce offering

The growing focus on ecommerce in building products is mirrored in the wider UK retail market and high street. Companies like Bradfords have been “through a long journey on ecommerce” and now find themselves well positioned to generate new sales through this channel. This represents a shift in focus for the building materials industry. A renewed focus on driving sales through the website highlights the importance of understanding insights from data. David recognises that good data is an important investment and Bradfords work closely with suppliers to ensure they are capturing data.

Overall, the pandemic has led to a renewed focus on digital strategy.

“I think the pandemic has really forced people and businesses to really look at their digital platforms”.

What does the future of trade counter operations look like?

Digitalisation in building supplies merchants during coronavirus has caused a spread in footfall across the day in shops. David forsees that click and collect will become a bigger part of building merchant life, likely as a separate service. Offering click and collect on light and heavy side products, such as forklifts, will require companies to restructure the way they operate. Key considerations are:

  • Resource to ensure they can offer customers quick turnaround time
  • Speed and efficiency of processes
  • Omni channel offering
  • Flexibility around opening hours – digitalisation opens up a 24 hour service
  • Product ranges

The ability to react quickly to meet changing demand is key, both within the business and across the supply chain. Indeed, David recognises the importance of planning ahead and sees the importance of builders merchants becoming “much more productive in the future”.

Changing relationships across the supply chain

Will digitalisation disrupt the value chain? Does it change the relationship between manufacturer, distributor and end user?

David sees this as an evolution rather than disruption:

“I think the relationship between the merchant, and the supplier will change dramatically. You know data is so important and historically I’ve found that data within our supply chain is very poor… a lot of manufacturers just don’t hold the level of data needed in this new world…

I think there’s a big wakeup call coming”.

Merchants need to be mindful of potential risks, particularly if they:

  • Are slow to react to digital customer demand and develop their eCommerce platforms
  • Don’t react quickly – “actually some of the suppliers will vertically integrate and sell direct and cut us out.”

This evolution also presents a number of opportunities for building supplies merchants to:

  • Work with suppliers that are invested in data and technology
  • Build stronger vendor relationships
  • Attract a new demographic of customer
  • Understand the many payment platforms and react accordingly

In summary, digitalisation across building supplies gives businesses the opportunity to adopt digital, improve customer experience and improve supply chain relationships.

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construction curzon

Performance turnaround at global construction product manufacturing group

The issue

  • A European headquartered global construction product manufacturing & distribution group with a C. and S. American Division located across 14 countries
  • The Division was consistently the worst performing business unit in the Group
  • Interventions from Europe had failed to address the issues and turn performance around
  • Performance was poor with an EBITDA generation significantly lower than the Group average
  • Underperformance was a consequence of a multitude of issues: poor sales disciplines, inefficient production, lack of adequate cost management and ineffective leadership
  • Previous attempts to turn the business around with other consultancies had failed
  • The challenge was not only to quickly improve performance, but to set up the business for sustainable profitable growth

What we did

  • With our Alliance Partner for C. and S. America, Curzon established a programme team to implement a comprehensive change effort
  • A focus on commercial performance including pricing management and product mix optimised the market opportunities and stopped margin give-away
  • Introduction of lean practices in manufacturing and distribution facilities improved productivity and started to tackle excess inventories
  • Organisational changes were made to reduce management overheads and to streamline support functions
  • Initiatives were piloted in country businesses and the learning was transferred to other business units through a centrally managed process to coordinate and accelerate the impact

construction curzon

The results

  • Within one year the division rose from the worst to the best performer in the Group
  • The combination of programme and other initiatives were delivering measurable bottom-line savings with a headline profitability run-rate that had tripled
  • Change was happening on a broad base and over 1000 staff across multiple countries were involved improving the business
  • Capability development and introduction of new tools, disciplines and ways of working had provided a solid platform to sustain the results

An award-winning team

Curzon consulting mca finalist 2019

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