Tier 1 supplier fixed cost reduction through offshoring

An automotive Tier 1 supplier wanted to expand its global business while cutting costs. Its fixed costs were higher than best-in-class players, and its services and back office footprint was fragmented with a number of sub-scale technical centers. The client also wanted to expand its offshoring footprint to India, China, and Mexico.

Strategy& developed a plan for improving performance by reducing fixed costs in technical functions. The team formulated a strategy to reduce variable costs through technical cost reductions as well. The plans consolidated offshoring centers while supporting increasing business pursuit in Asia. As a result of implementing these recommendations, costs were reduced by 15% while productivity and effectiveness improved 25%.