Background and Challenge
The client is a global manufacturer serving North America, Europe, Asia and South America. Historically, the company’s manufacturing operations were primarily based in North America and Europe, but it shifted some manufacturing capacity to emerging markets over time. The company believed it was losing or had lost its competitive advantages on cost and design while falling far behind on inventory management, sourcing capabilities and in-house manufacturing know-how.
The company suspected the reasons for these developments lied in its convoluted manufacturing footprint and global supply chain. Therefore, the company asked L.E.K. Consulting to help develop a global supply chain strategy for the business that would maximize corporate profits and build competitive advantages through engineering, design for manufacturing and delivered costs.
Approach and Recommendations
We utilized a three-pronged approach:
- Conducted a detailed capability and performance diagnostic across key functions and global manufacturing sites
- Developed a green field global supply chain for the client’s worldwide product demand
- Pragmatically refined the green field supply chain to a future state model that was achievable for the client and maximized its existing capabilities and assets
To build the green field solution, our team developed a novel, global supply chain optimization framework and model that could analyze the full supply chain (design, engineering, sourcing, manufacturing, assembly and distribution). The solution was a highly structured and flexible model which isolated each step in the chain, aggregated product SKUs into manufacturing families to simplify the complexity, and utilized decision matrices to dynamically handle all potential location and product combinations.
Utilizing the dynamic model, we conducted primary and secondary research and analyzed company data to create a highly accurate model which identified the optimal manufacturing locations and suggested a green field solution with significantly lower levels of complexity than the client’s existing paradigm.
We then reconciled the client’s existing capabilities and assets with the green field supply chain design to identify a future state model for the client and a roadmap to achieve their desired future state.
Results
Global lead times were expedited, and the company achieved industry-leading inventory turns of more than 25%.
The manufacturing footprint was rationalized from ten sub-scale facilities to six facilities of efficient scale.
Annual operating profits increased by 70%.
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