Taking manufacturers back to profit - Emerging from the downturn as a winner

Taking manufacturers back to profit Emerging from the downturn as a winner Tim Lawrence and David Hatrick 13th October 2009 The impact of the economic crisis is beyond the experience of anyone in manufacturing today – and the recovery is likely to be a long haul 3.0 • Business as usual is a long way off, and Winners Potential Winners manufacturers face tough challenges in the 2.5 next few years • There is no clear view of the recovery, how 2.0 long and in what form it will take Liquidity 1.5 – Simple recession 1.0 – A ‘zombie’ world – Double dip recession. 0.5 • The growth of China and India as the world’s Casualties Targets - key manufacturing locations has hardly been - 0.5 1.0 1.5 2.0 2.5 dented by the crisis IV / MV • All of which combines to make the future very For further reference see: Living with Zombies an update to Surviving and Thriving in the Economic Crisis, by Mark Thomas uncertain for European manufacturers. © PA Knowledge Limited 2009. EMS - Taking manufacturers back to profit.ppt Page 2 Leaving manufacturing leader’s facing the challenge of squaring the circle CEO SURVIVING THRIVING Preserving cash, reducing Investing in future winners CFO working capital by any means possible Creating high growth products CTO Lean R&D, reducing time to market and services Supply Creating responsive, customer Minimising cost and working capital focused supply chains Chain Managing complexity and Operations Minimising cost and working capital optimising operations © PA Knowledge Limited 2009. EMS - Taking manufacturers back to profit.ppt Page 3 So how do manufacturing leaders ensure their business survives today and thrives tomorrow? Create space Create agility Create the future Reduce your complexity Embed customer driven supply Create future profit platforms Maximise Productivity Optimise Product Cost Ditch the incremental Through Open Innovation Understand the future for your customers and consumers © PA Knowledge Limited 2009. EMS - Taking manufacturers back to profit.ppt Page 4 Create space By now, the low hanging fruit has been addressed. It is time to look at new approaches to reducing cost KEY ELEMENTS KEY OUTCOMES Reducing product cost Optimise product cost on by upto 16% through lower supplier costs and improved design Create space Simplify the supply chain Reduce complexity leading to reductions in SKU’s / components and savings of 5-10% © PA Knowledge Limited 2009. EMS - Taking manufacturers back to profit.ppt Page 6 Product cost optimisation – Creating a green field approach to cost reduction, on average identifying 25% potential savings and realising 16% Costs Best practice costing Projects Level of Implementation Project 200 190 74 % 1. Best practice calculation costs 140 Optimised processes, materials, 100 Overhead machines, salaries, overhead profit 0 Analysis of potentials Implementation Potential Production 25 % costs 2. Best value stream Level of Implementation 64 % 20 % Cost-efficient production sites, 16 % optimised value streams 10 % 0% Potential identified Potential realised Material 20% costs 3.