Operations restructuring provides cost savings
A life sciences company on the Fortune Global 500 list was undergoing global business transformation initiatives. It sought opportunities to transform its global capacity, optimize plant space, and optimize machinery utilization.
Industry consolidation and ever-changing market demand forced the supplier to evaluate its manufacturing footprint. Substantial excess capacity across its manufacturing sites suggested that costs were higher than necessary and work processes inefficient.
Knowing it had significant improvement opportunities, such as insourcing, outsourcing and right-sizing, the manufacturer decided to restructure its current operations. This restructuring would allow for immediate cost savings and long-term improvements, positioning the company for growth, and allowing it to respond to looming market changes.
Our team performed a thorough business review and operations assessment. The assessment focused on critical areas including a transformational change to the cost structure, sustained operational improvements, and alignment with operations and quality. Working shoulder-to-shoulder with the management team and first-line supervisors, we identified more than 25 specific projects that would improve transformational cost opportunities. Our team developed a cost model to analyze various options for the plant footprint and capacity. The custom cost model allowed the company to forecast square footage requirements by product family and processing method. This solution resulted in cost-reduction enhancements that included:
- Demand-based planning
- Decreased inventory
- Consolidated and optimized equipment
- Reduced WIP and scrap
- Increased capacity utilization
- Reduced operations redundancy and waste
- Developed KPIs and tracking
Through equipment consolidation and optimization, improved inventory management practices, and process improvements, the manufacturer is on track for estimated cost savings of approximately $100M in three years. The company implemented a demand-based planning tool that fixed its current issues, while providing flexibility for the future.