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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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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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
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Operating model refinement and commercial focus to deliver a step change in business performance
The issue
- A subsidiary of a global defence company, providing technology-based R&D solutions and advisory services to government and defence organisations and private sector companies at the cutting edge of secure communications and cyber warfare
- Despite repeated calls by Group to improve, the business continuously failed to meet performance expectations on revenue growth, profit margin and free cash flow
- The business was suffering from an overly-layered and siloed organisation structure, with burdensome management processes and lacking commercial focus
- The underlying issues were structural and an absence of effective performance management, wrongly being justified because business discipline would stifle creativity and innovation
Solution
- Undertook a business-wide design and business case development stage to anchor the current performance failings and the required changes
- Implemented over a 12-month period working alongside the business unit leadership with a structured plan;
- A new leadership team established, with stronger governance processes, metrics, and proactive staff engagement
- Simplified the operating model and aligned capabilities to market needs
- Re-framed value propositions and initiated the move into critical national infrastructure
- Implemented resource management to drive productivity uplift
- Implemented new mentoring and HR processes to underpin talent management
- Supported post-implementation by refreshing the plan
The results
- 29% revenue uplift (versus budget target)
- 18% Return on Sales achieved versus a 15% target for the financial year
- 90% improvement in business cash flow
- 10% points increase in Engineer productivity, with a continued increase to 74% utilisation in year 2, and climbing
- Transformed the operating model and business culture to be customer and commercially focused
- Established performance management at the business and individual level
- Underpinned changes with disciplines, governance, reward structures and visibility
- The Project won the Management Consultancy Association’s award for “Performance Improvement in the Private Sector” with full sponsorship of the client
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