by Jan Malasek | Dec 14, 2021 | Operations Improvement, Strategic Sourcing
A major consumer products US company aimed to significantly reduce COGS through their OPEX manufacturing strategic plan. The company understood that in order to significantly reduce COGS, they needed to diversify their manufacturing footprint and simultaneously optimize the Product Portfolio, and Low-Cost Procurement and Low-Cost Manufacturing Practices. SITUATION OVERVIEW The company had a number of plants across different regions in the US but no international plants. The current manufacturing footprint could not sustain the market pressure caused by the lower prices of competitors with plants in Asia and Latin America despite all the cost reduction efforts. Driven by the new aggressive cost reduction mandate Senior Management decided to start up a manufacturing plant in Mexico to take advantage of the low-cost manufacturing labor in the country as a key strategic initiative to reduce COGS and improve EBITDA. The company hired OnDemand Professional Network member Juan-Luis Munoz as the VP/GM of International Operations to lead this strategic endeavor. APPROACH The team first performed an assessment of the OPEX Current State, Product Portfolio, Manufacturing Network, OTC Lead Times (Order-To-Cash) and top spending accounts. The company graded poorly along several high-level OPEX critical elements: Fragmented and isolated improvement effortsLack of manufacturing standardization and best practice deployment systemPeople engagement, motivation and empowermentStructural misalignmentUnstandardized KPI measurement and reportingBusiness macro flows not properly connectedObsolete manufacturing methodologies Understanding the current state was crucial in planning a successful manufacturing plant in another country. Among other things, the team uncovered significant manufacturing practices being conducted with the use of “tribal knowledge” only. When some level of standardization of processes was found, this was executed by multiple individuals in different...
