Global optimization of a complex network of manufacturing locations

Assignment

How to optimize the current manufacturing footprint which was established through mergers and acquisitions? Which scenarios are relevant and how do they compare from a cost, service, location quality and risk perspective?

Project summary

This company operates 36 manufacturing plants globally. This network was established mainly by acquiring other companies over the last 15 years. The company has 5 important product groups, manufactured in different locations and varying from high volume standard products to very specialized products manufactured in small volumes for specific customers.

The project objective was to conduct a global assessment of the most relevant scenarios and to determine the most optimal scenario based on which a transition program for the next few years should be developed and executed.

Our approach

BCI proven methodology for manufacturing footprint optimization was applied in this project. In the AS-IS phase the current manufacturing footprint of the company was mapped for all 36 manufacturing locations, the product portfolio, quality of the operations, risks, costs, service levels, etc.

Also, strategic interviews and workshops were held with key executives of the company to get a clear picture of the strategic direction of the company, its strategic objectives, new markets to be entered, expected product launches, etc. Based on this input projections were made of future volumes, geographical market spread, and market/customer requirements.

Using BCI proprietary software for modelling manufacturing footprints a scenario analysis model was developed. At first the company’s baseline (AS-IS situation) was modelled as a reference for the modelling of the future scenarios. These future scenarios were determined together with the client’s team in an interactive scenario workshop. The base scenarios defined were:

• Optimized AS-IS: limited adjustments to the current set up (e.g. product reallocations, transport cost reduction strategies, process optimizations within a factory)
• Regional optimization: consolidation of manufacturing plants on each continent
• Lowest cost: radical changes to the network in order to be able to achieve lowest costs possible
• Regional product mix: optimization through a combination of standard and specialty products

Based on the analyses and conclusions the preferred scenario was selected and a program was developed for transitioning from today’s situation to the future optimized manufacturing footprint. The optimal manufacturing footprint included 25 manufacturing locations of which 3 large new facilities (2 and Asia and 1 in Latin-America).

Result

Phased implementation of the company’s new manufacturing footprint including the realization of three new manufacturing plants. Total cost reduction within 5 years: 18.6%.