GLOBAL ELECTRONICS COMPANY

 

SITUATION

  • Anticipated revenue growth (beyond current $5.5 BN) failed to materialize and EBIT dropped to 8% from 15-17% over a four-year period
  • Company’s technology leadership and broad product offering no longer positioned them as the market leader
  • Principal competitors’ revenues and market shares were growing at the expense of company
  • Years of very high capital investment to satisfy projected growth resulted in poor utilization of manufacturing assets and high unit costs
  • Customers characterized company as non-competitive, too complex and very difficult to do business with

RESULTS

  • In the first year laggard manufacturing plants were brought up to Best Company Practices to improve product quality and lower unit costs
  • The cost of indirect purchased goods and services was reduced by 12%
  • In the second year manufacturing asset productivity (plant and equipment) was improved by 52%
  • $400 MM of unprofitable and/or declining-volume products were outsourced to Asia to reduce costs
  • EBIT improved from 8% to 23% of revenue and the company’s market capitalization increased by 150%

ACTION TAKEN

  • Implemented broad Plant Improvement Program to bring operating performance up to “best plant” levels
  • Applied Strategic Sourcing methodologies to global indirect materials and services purchases
  • Modeled global manufacturing network for lowest cost; developed a strategy for rationalizing the network; created and executed implementation plans
  • Implemented multiple plant productivity initiatives requiring no capital investment
  • Reduced cost of purchased goods and services by aggressive application of strategic sourcing methodology
  • Achieved additional plant workforce reduction through negotiation of new five-year labor agreement