Our customer’s team of top engineers were using new technology to produce high quality, innovative products. All engineering and manufacturing was done in-house. Each product was made of many straightforward parts, but the sum of the parts created unique intellectual property for the business.
Insider Pro’s challenge was to help the business align on the overall end goal. The Management team was focussed on EBITDA, cash and working capital but the focus of the Operations team was on existing in-house manufacturing efficiency. We assessed:
The range of components required and current cost of manufacture
Return on capital employed
Cash tied up in working capital
Opportunities to out-source certain components and reduce overall cost
Change is hard
Especially when you have been producing high value, high precision components over many years. Belief that in-house manufacture is the right way can be hard to question. There was understandably huge pride in the way things were currently done.
Engaged all stakeholders across the business to hear their point of view
Found out the facts by analysing the in-house manufacturing cost and stock data
Explored the external market in depth to unearth and validate opportunities
Got to the root of where the IP of the business really lay.
Results and Approach
Insider Pro identified that 60% savings could be achieved by outsourcing all components to world-class manufacturers. Potential new suppliers agreed to manufacture in higher volume batches, driving up manufacturing efficiency, and to hold stock at their own cost, decreasing working capital requirement and improving cashflow. Of the 300 parts made in-house, the savings from out-sourcing just 17 parts accounted for an overall 10% reduction in the total cost of manufacture. Furthermore, there was a reduction on capital requirements for machinery which in turn freed up cash.
The cost reduction achieved from just 17 items led to:
Sticking with the status quo can be seen as the least risk option. Fear of the unknown can often inhibit change. We used stakeholder consultation and influencing skills to raise the right questions and explore the options.
Evidenced based decision making is important and underpins a strong business case for change. Thorough analysis of all data available across the business provided visibility of true cost and efficiency.
Knowing the market and having the expertise to ask the right questions of potential suppliers is a skill. Negotiation of the price comes second once you have qualified the supplier on ability to provide the right service and quality.
Finding the right solution for our customer is critical. The outcome has to be fit for purpose and meet company goals and objectives. The right outcome will accelerate value delivery and create more opportunity.
Procurement projects can quickly eat up stakeholder time which can slow progress and frustrate the management team, especially when there are multiple projects in flight. The Insider team overcame this through:
Using highly qualified experts with deep
experience and insight into the categories.
This reduced reliance on stakeholders
allowing them to feel involved but without
requiring them to undertake
significant additional work.
Focusing on making the solution fit the client
and understanding that complex ways of
working or change programmes were unlikely
to be effective in a fluid environment.
MANAGEMENT TEAM ENGAGEMENT
Working closely with the senior team
to raise issues early and provide
them with impartial advice
to help them make decisions.
Jeremy is the Managing Partner of the business. Over the course of his career Jeremy has worked with over 50 organisations in sectors as diverse as retail, construction, hospitality, manufacturing, healthcare and not for profit.Experience
Jeremy has worked with the following organisations