SUPPLYCHAIN TRANSFORMATION CASESTUDY Global Manufacturing Footprint Optimization: Mastering Complex Production, Logistics, and Distribution Challenges
Some Key context to this project
- Our client is a leading company in the Fast-Moving Industrial Goods sector, with a global presence in over 100 countries, including both highly populated and remote locations worldwide.
- Our client has manufacturing plants in India, Australia, China, Brazil, Canada , USA , Philippines and in Germany.
- With this many manufacturing plants our client is having a tough time managing and optimizing.
- The primary challenge facing our client is a low average utilization rate of 53% for their manufacturing plants.
- Additionally, the supply chain has become increasingly complex due to a combination of international and domestic regulations
Table of Contents
Problems faced by the client
- Presently, our client has 9 underutilized manufacturing locations. These facilities produce 4000 products and distribute them to 100 countries, leading to a complex supply chain model.
- This complexity is further exacerbated by regulations related to the security, transportation and storage of dangerous chemicals.
- Without proper optimization, our client is struggling with issues such as opaque cost management, forecasting demand, low utilization of production capacity, resulting in significant financial losses.
- As a result, our client is facing significant financial losses from multiple directions.
Objectives, Mission and goals
- Our client needs to optimize their manufacturing footprint to streamline production
- Improve plant utilization.
- Simplyfy the supply chain.
- Due to strict regulations for storage and distribution, they are unable to accurately predict demand, resulting in problems such as overstocking and understocking.
- This can cause entire batches of goods to be wasted, as well as leading to shortages at high-demand locations, forcing customers to seek out competitors.
Navigating Industry Trends and Competition: industry trends
- Lean manufacturing: Companies are implementing lean manufacturing principles to optimize their production processes and reduce waste.
- Right-sizing manufacturing: Companies are looking to optimize the size of their manufacturing facilities to better match demand, which can help to reduce costs and improve efficiency.
- Flexible manufacturing: Companies are implementing flexible manufacturing systems that can quickly switch between products, which can help to improve efficiency and reduce costs.
- Automation and Robotics: Companies are increasingly adopting automation and robotics in their manufacturing processes to improve efficiency, reduce costs and increase output.
- Supply Chain Visibility: Companies use technology to optimize logistics and inventory management, improve efficiency and reduce costs in entire supply chain.
- Data-driven decision-making: Companies are using data and analytics to make better-informed decisions, which helps them to optimize their operations and better predict consumer behavior.
- Sustainability: Consumers are becoming more conscious of the environmental impact of products they purchase. This has led to a growing demand for sustainable and eco-friendly products.
- Direct-to-consumer (D2C) models: With the growth of e-commerce, companies are increasingly selling directly to consumers online, bypassing traditional retail channels.
Navigating Customer Expectations: Adapting to Changing Behaviors in Today's Market
- In order to stay relevant and competitive in the FMIG sector, companies must be able to anticipate and respond to changes in customer behavior, and continuously adapt their product offerings and marketing strategies to meet these changing demands.
- Increased demand for personalization and customization: As consumers seek more personalized products, companies may need to invest in new technologies or production processes to meet these demands.
- Increased focus on health and wellness: Consumers are becoming more health-conscious and are looking for products that align with their health and wellness goals, such as organic, sustainably sourced, and minimal harm to environment.
- Changes in market conditions: Companies may struggle to keep up with changes in market conditions, such as economic downturns or natural disasters, which can affect the availability of products and change the consumer behavior.
Uncovering the Hidden Challenges of Manufacturing Footprint Optimization
- Inefficient use of resources: Without proper optimization, companies may have manufacturing facilities that are underutilized or not located in the most strategic locations, which can result in wasted resources and increased costs.
- Difficulty in forecasting demand: Without an optimized manufacturing footprint, companies may struggle to accurately forecast demand, leading to overstocking or understocking of products, which can result in spoilage or lost sales.
- Complex supply chain: Without a streamlined manufacturing footprint, companies may have a complex and inefficient supply chain, which can result in increased costs, longer lead times, and difficulty in controlling and tracking the movement of goods.
- Difficulty in transparent costing: Companies that do not optimize their manufacturing footprint may have difficulty in understanding their true costs of production, which can make it difficult to price products and make decisions about where to allocate resources.
- Lack of responsiveness to market changes: Without an optimized manufacturing footprint, companies may struggle to quickly adapt to changes in market conditions, such as changes in consumer behavior or shifts in demand for certain products, which can make it difficult to remain competitive.
- Difficulty in compliance with regulations: Without an optimized manufacturing footprint, companies may struggle to comply with international and domestic regulations regarding the storage and movement of dangerous chemicals and other materials, which can result in fines and penalties.
- Difficulty in optimizing the production process: Without an optimized manufacturing footprint, companies may struggle to optimize the production process, which can result in higher production costs, longer lead times and difficulty in controlling the quality of the final product
- Difficulty in meeting consumer demands: Without an optimized manufacturing footprint, companies may struggle to meet consumer demands, which can lead to lost sales and a decline in customer satisfaction.
Overcoming Complexities in Manufacturing Footprint Optimization: Navigating Challenges and Finding Solutions
- Complex and changing regulations: Regulations on storage and movement of goods can be complex and change often, making it hard to comply and optimize manufacturing footprint.
- Lack of data: Without accurate data on production, demand, and costs, it can be difficult to make informed decisions on manufacturing facility location and optimization of manufacturing footprint.
- High costs: Optimizing the manufacturing footprint can be a costly process, as it may involve closing or consolidating facilities, relocating equipment and employees, and investing in new technology and infrastructure.
- Difficulty in forecasting demand: Accurately forecasting demand for products can be difficult, particularly in a fast-moving industry goods (FMIG) industry, where consumer behavior and preferences can be unpredictable.
- Difficulty in aligning with company’s strategy: Optimizing the manufacturing footprint may not align with company’s strategy, goals and objectives which can make it hard to implement.
- Difficulty in integration: Integrating the new manufacturing footprint with the existing systems and processes can be difficult, which can lead to delays and increased costs.
- Difficulty in identifying the best optimization strategy: There are many different optimization strategies that can be used, and selecting the right one can be difficult, as it depends on a variety of factors such as the products manufactured, the target market, and the resources available.
Who benefited from not solving the problem? What benefit did they derive?
- If our client does not implement manufacturing footprint optimization, they may not see the benefits of cost reduction, increased efficiency, and improved demand forecasting.
- This can result in higher costs, inefficiencies, and difficulty in forecasting demand which can lead to overstocking and understocking. This can result in spoilage of products and loss of revenue.
- In contrast, competitors who do implement manufacturing footprint optimization may see an increase in profitability, improved customer satisfaction, and a competitive edge in the market.
Actions Creating a Comprehensive Action Plan: Solving Root-Level Problems in Manufacturing Footprint Optimization
- We Collected and analyzed data on production, demand, and costs to gain a better understanding of the current manufacturing footprint and identify areas for improvement.
- Developed a detailed plan for optimizing the manufacturing footprint, considering factors such as production capacity, demand forecasting, logistics, and compliance with regulations.
- Implemented new technologies and processes to improve production efficiency and reduce costs.
- Reviewed and optimize the supply chain to ensure that the right products are delivered to the right locations at the right time.
- Conducted regular reviews of the manufacturing footprint to ensure that the optimization plan is on track and make any necessary adjustments.
- Continuously monitored the costing, by considering the raw materials cost, logistics cost, labor cost, taxes and regulations, to keep the cost under control.
- Communicated the changes and the benefits of the optimization plan to all relevant stakeholders, including employees, suppliers, and customers.
- Continuously measured the performance of the changes and take corrective action if necessary.
- Continuously improved the process and adapt to the changing market trend and customer behavior.
Uncovering Manufacturing Footprint Optimization through importance of Data Analysis
- Once the data is collected, it is analyzed using statistical and mathematical techniques to identify patterns and trends that can be used to optimize the manufacturing footprint.
- This can include identifying the most cost-effective locations for manufacturing facilities, identifying the most efficient production processes, and forecasting demand for products.
- Analysis is necessary to implement manufacturing footprint optimization because it allows for the collection and examination of data on production, demand, costs, regulations, and other factors that can impact the efficiency and effectiveness of manufacturing operations.
- This information can then be used to make informed decisions about where to locate manufacturing facilities, how to optimize production processes, and how to manage the supply chain.
- Additionally, AI and machine learning techniques can be used to analyze the data and make predictions about future demand and production needs, which can help further improve the manufacturing footprint’s efficiency and effectiveness.
Timeframe for Conducting In-Depth Data Analysis
- It took 20 day to conduct the preliminary analysis, and 10 weeks to conduct the additional analysis for manufacturing footprint optimization.
- An additional 2 weeks were required to present the findings and gain approval from the board
Our recommendation to client
Our proposal to streamline the production included
- Australian plant to be cord hub site.
- Enabling closure of some plants close to Australia, as they are redundant.
- Australia plant to serve Asia, Europe and African markets.
- Improving wet capability of Australian plant for additional product family manufacturing
- Setting a low cost manufacturing plant in Africa to serve other countries.
- Setting up standard production to streamline supply chain.
RESULTS Achieving Success: How Our Goals and Results Led to Benefits in Manufacturing Footprint Optimization
- The study revealed that implementing our recommended manufacturing footprint optimization strategy led to significant cost savings of $12 million per year.
- Our client was able to streamline their production facilities worldwide, resulting in better demand forecasting and inventory optimization.
- By optimizing the location and number of manufacturing facilities, our client can reduce production costs and improve the efficiency of their supply chain
- Additionally, by optimizing the production process, our client can reduce waste and improve the quality of their products, which lead to increased customer satisfaction and loyalty.
- This ultimately improved their bottom line profits
Vivek Sood: Sydney based managing director of Global Supply Chain Group, a strategy consultancy specializing in supply chains. More information on Vivek is available on www.linkedin.com/in/vivek and more information on Global Supply Chain Group is available www.globalscgroup.com
Vivek is the Managing Director of Global Supply Chain Group, a boutique strategy consulting firm specialising in Supply Chain Strategies, and headquartered in Sydney, Australia . He has over 24 years of experience in strategic transformations and operational excellence within global supply chains. Prior to co-founding Global Supply Chain Group in January 2000, Vivek was a management consultant with top-tier strategy consulting firm Booz Allen & Hamilton.
Vivek provides strategic operations and supply chain advice to boards and senior management of global corporations, private equity groups and other stakeholders in a range of industries including FMCG, food, shipping, logistics, manufacturing, chemicals, mining, agribusiness, construction materials, explosives, airlines and electricity utilities.
Vivek has served world-wide corporations in nearly 500 small and large projects on all continents with a variety of clients in many different industries. Most of projects have involved diagnostic, conceptualisation and transformation of supply chains – releasing significant amount of value for the business. His project work in supply chain management has added cumulative value in excess of $500M incorporating projects in major supply chain infrastructure investment decisions, profitable growth driven by global supply chain realignment, supply chain systems, negotiations and all other aspects of global supply chains.
Vivek has written a number of path breaking articles and commentaries that are published in several respected journals and magazines. Vivek has spoken at several supply chain conference, forums and workshops in various parts of the world. He has also conducted several strategic workshops on various aspects of supply chain management. He received his MBA with Distinction from the Australian Graduate School of Management in 1996 and prior to these studies spent 11 years in the Merchant Navy, rising from a Cadet to Master Mariner.
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