Case Study: Automotive Manufacturing Earnings Improved via Operating Asset Effectiveness
A well established manufacturer of capital intensive goods in the
automotive industry struggled on many fronts. When the manufacturer
was purchased by a private equity firm, the goal was to transform the
company, targeting to improve earnings (EBIT) by 5 percent.
Challenge
The turnaround faced multiple
challenges. These included coordination across multiple global
locations, and gaps in management and leadership capabilities. A.T.
Kearney was brought in to help ensure the success of the project,
especially in adding operational expertise.
Approach
First, we conducted an audit to
identify the major levers for improvement. We then applied our
operating asset effectiveness (OAE) toolkit and methodology. To
improve output, we compared a theoretical best with actual net output
in three areas: utilization, throughput, and acceptance rates. Major
areas for improvement included:
- Asset productivity
- Contract manufacturing
- Operations improvement
- Production strategy
Results
Overall, the project was able to reduce
conversion costs by 10 percent, with savings generated from OAE
improvement, overhead cost reduction, inventory reduction, and capital
expenditures assessment.
Equally important, the team and manufacturer instituted a number of key changes to ensure lasting improvements, including:
- Project governance tools (charter book, initiative tracking, flash reporting, etc.)
- Performance tracking beyond the engagement
- Project goals integrated in MBOs of management
- Project organization embedded in manufacturer’s organization
- Detailed implementation plans of all identified savings opportunities
Contact
For more information, contact Stephan Mayer.
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