Our client, the European arm of a global highly engineered products company, was facing challenging external conditions.
Our client, the European arm of a global highly engineered products company, was facing challenging external conditions: Sustained low demand in Europe through the crisis as well as cost and volume pressures from developing industrial players in lower-cost countries had led to a decline of the manufacturing industry in most Western European countries.
Given these pressures, the client had set out to reduce its indirect structural cost by 50 percent, where 30 percent was planned to be efficiency related and 20 percent volume related and footprint related. Company leaders turned to Strategy& for help in reaching their ambitious efficiency-related target through primary, productivity, and structural levers. All indirect manufacturing functions were to be assessed, including maintenance, tooling, manufacturing engineering, quality, supply chain, facility management, environment, health and safety, human resources, and production management.
Gradual restructuring approach
We conducted an internal benchmarking study to identify the two least efficient production sites. These sites became the focus of our effort.
After defining a top-down staffing target based on productivity and performance benchmarks, both at the plant level and by function, the Strategy& team performed a functional analysis for all indirect manufacturing functions. We systematically screened these functional departments for non-strategic and low value-add activities that could be removed, evaluated staff utilization rates, and compared practices on the ground with industry best practices. This led us to define a catalog of performance improvement opportunities.
We also assessed the client’s organizational design and recommended a new organizational model that enabled the key capabilities that are necessary to deliver low-cost products, per the firm’s strategy. The new structure also had the benefit of consolidating fragmented activities and optimizing spans and layers.
Approach to identifying and implementing performance opportunities
The project has achieved its objective to identify opportunities that substantiate the overall efficiency improvement target. An implementation plan for each of the identified opportunities has been developed, including actions, timing, milestones, and required resources. Functional leaders are aligned behind the opportunities and committed to realizing the targets for their respective functions. Implementation of many opportunities continues to make good progress.
The organizational transformation has by and large been implemented, including new roles and responsibilities for employees down to the lower levels of the organization.