SITUATION
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- 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
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RESULTS
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- 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%
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ACTION TAKEN
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- 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
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