On average, direct product costs amount for two-thirds of manufacturing companies’ total costs. Reducing these costs is therefore the most important component of any effort to significantly improve a company's total cost base. The Oliver Wyman product cost reduction approach is based on deep industry expertise and contains a mixture of methods that are tailored to the specific requirements of the client. It encompasses strategic approaches like product portfolio management or modularization as well as operational levers like the optimization of direct and indirect material purchasing or the lowering of costs through modifications of the product or changes in the supply chain. Experience has shown that the highest savings can be realized when the steps taken are framed and executed in a multifunctional project that incorporates purchasing, quality control, R&D, engineering, production, and sales.

The Industrial Products team at Oliver Wyman has a long and proven track record in optimization of product costs and in sourcing:

• Product cost reduction: Many different technological and commercial approaches can be used to reduce product costs. Ours is marked by its holistic nature – it is based on a deep technological, process-based, and commercial understanding of each specific product - which allows the application of the most efficient combination of cost-reduction levers. The range of relevant approaches includes strategic methods and tools like product strategy and product portfolio, modularization and standardization or the management of variants, as well as operational approaches for optimization. Multifunctional teams in managed workshops use operational methodologies like the “product-cost-down approach” to generate ideas based on custom-tailored analyses, such as specification analyses or cost-driver analyses. Savings of 5-15% can be realized within 24 months using this comprehensive approach as well as systematically involving suppliers. Implementation execution is crucial to ensuring that the measures result in the expected P&L impact.
• Sourcing Optimization: Based on an analysis of the current situation, the direct and indirect materials with the largest potential savings are identified by the Purchasing department and other relevant departments. After deciding on a strategy and a targeted supplier structure, we identify the best suppliers around the world, obtain quotes for the materials needed, and support the negotiations of the purchases with old and new suppliers. As a result, the portfolio of suppliers can be streamlined, supplier risk can be addressed from the start, and supplier relationships can be optimized. We offer analytic support in preparation for price negotiation with current suppliers, as well for identifying alternative possibilities of in- and outsourcing.  

Oliver Wyman has worked on a wide range of product cost reduction projects in manufacturing companies. Our unique contribution comprises the specific industry knowledge and the transfer of best practices from other cost-intensive industries:

• Specific understanding of the manufacturing and supplier markets
• Use of a multifunctional, comprehensive, and pragmatic approaches to reduce product costs
• Consideration of technological, process-based, and commercial measures in the creation of a complementary overall approach
  

In their race for efficiency, manufacturing companies are facing a disruptive and demanding environment but are also struggling with internal hurdles (e.g., a lack of skilled resources, motivation, and management commitment). Despite unceasing improvement programs, companies still don't succeed in spreading and sustaining performance improvement. The challenge is to design an implementation strategy that both delivers an outstanding level of performance and also changes standards and behaviors to sustain performance.

Oliver Wyman has designed a proven methodology based on five pillars; it has been applied in a wide range of businesses and environments:

• Strategy and vision: Design ambitious but realistic objectives consistent with the company's strategy and an implementation strategy taking into account the operational context.
• Operational practices: Build a toolbox of operational practices supporting performance improvement. These practices must be integral to the global value chain and must support the company's business priorities.
• Site structure and network optimization: Redesign the current configuration of production sites and factories, which are often a product of history that no longer corresponds to the company’s current needs in terms of production efficiency or global presence. Often a new organizational division of labor can reduce costs for logistics, warehousing, purchasing, HR, and administration. This includes specialization, reducing complexity, plant closings, and transfers to less cost-intensive locations.
• Management systems: Design a performance management system to break down and monitor the realization of objectives - from top management to shop floor. The system has to support decision making based on sound data analysis and to allow tracking of changes and their performance impact.
• Behavior and culture: Cultural evolution is the bedrock of sustainable change. Continuous improvement has to become a second life, in which everybody re-thinks current practices to identify sustainable improvements.

In such programs Oliver Wyman has the proven capabilities to support a wide range of measures to maximize client value. We are:

• A partner to share a vision, to challenge ideas, and to set targets
• An objective and experienced external point of view to assess and benchmark current performance and practices and to identify improvement opportunities
• An expert to facilitate project prioritization and implementation planning
• A problem solver to re-think traditional habits and ensure necessary rigor
• A coach to foster implementation of new practices, to change behaviors, and ensure sustainability of improvementsA trainer to transfer skills and competencies
  

There are times when, in addition to the realization of existing cost-reduction projects, a “quantum leap” in cost reduction or efficiency improvement is necessary. And finding a balance between ambitious, far-reaching cost-cutting objectives and improvement of the underlying processes is critical to improving a company’s operations, motivating its high performers, and sustaining an efficiency initiative over the long term.

Our in-depth industry expertise allows us to individually adapt optimization levers to a client’s specific market requirements and competitive environment. Starting with the company-specific situation, we apply relevant benchmarks and best-practice know-how to the formulation of effective measures. Ongoing monitoring of cost savings ensures lasting and durable savings.

The Industrial Products team at Oliver Wyman has a long and proven track record in optimization of overhead costs:

• R&D efficiency: We review opportunities for reducing project delays, analyze the R&D portfolio for unprofitable projects, provide for a faster market introduction of products (Launch Management), and establish more efficient R&D processes.
• Sales efficiency: In years of continual growth, sales organizations tend to become “bloated and slow”. Even in cost-cutting projects the sales department is often not addressed significantly. Key to increasing sales efficiency is the conversion from reaction into action. Sales process effectiveness has to be increased and sales expenses have to be reduced simultaneously. Experts from Oliver Wyman address all sales activities, eliminate “waste”, and optimize the underlying processes.
• Administrative costs: Classic “Minus-10-percent programs” frequently do more harm than good. We reduce staff costs on the basis of differentiated benchmarks, using our experience to introduce new management processes and reduce indirect costs. We also introduce new management processes, taking underlying IT systems into consideration, and thus ensure a reduction of administration costs. 
• Work efficiency: To address the key role that “labor” plays in corporate profitability, we introduce success-based compensation components, reduce special payments, and support the implementation of longer working hours. 

Oliver Wyman has worked on projects targeting overhead cost reduction for many companies of different sizes. Our unique contribution comprises a combination of market and industry knowledge as well as methodological expertise:  

• Exact understanding of the manufacturing industry and its target markets
• Track record of successful overhead cost-reduction projects in manufacturing industries
• Methodological expertise in the management of complex, comprehensive, efficiency improvement projects

Backed by its years of experience, Oliver Wyman acts as a trusted adviser to companies and investors as they take on the challenges of strategic, operational and financial restructuring. In the process, we place a particularly high priority on developing sustainable restructuring concepts that address both the market and competitive environment as well as specific factors for success. Oliver Wyman acts as a coordinator for restructuring processes, as an objective expert and a neutral third party who provides quantitatively supported advice to address the interests of management, shareholders, lenders and other stakeholders.

Oliver Wyman's contribution to restructuring projects

Independent business reviews (IBR)

When an outside-in assessment of a company in distress is required, Oliver Wyman can leverage its deep industry expertise and extensive restructuring experience to identify risks and opportunities for a company, which are then used to assess business plan revenues, profits and cash flows. Special attention is paid to the viability of the business design and the ability of the company to win against its competitors.

Using benchmarks and best practices from industry peers and building upon our toolbox of methods to achieve operational excellence, we also give concrete recommendations on how to improve profitability and liquidity—often even beyond what was planned in the original business plan.

Hence, our IBRs are not only formal reviews but create real value for the company going forward.

Development of restructuring concepts

In devising its sustainably successful restructuring approaches to a client situation, Oliver Wyman draws on its deep base of knowledge about market trends and specific success factors, its far-reaching expertise about operational excellence methodologies as well as its solid grasp of the needs and options of various financial sponsors (i.e., equity/borrowed capital). We take an integrated approach in this work. Our restructuring concepts are based on four pillars:

• Strategic repositioning: The focus is placed on core markets and potentially profitable business fields. Business operations that destroy value will be closed or divested.
• Value-focused business model: Using our approach called value-driven business design, we optimize such business drivers as a company's customer, product and technology portfolio, define core skills and bring the organization into alignment with the strategy.
• Operational excellence: The focus here is placed on lean organizations and processes. In particular, this work is aimed at simplifying production networks and increasing efficiency and effectiveness by applying such methodologies as LEAN and Six Sigma. In addition, purchasing and the entire supply chain are optimized.
• Financial restructuring: On the basis of the strategic repositioning work, the value-focused business model and operational-excellence programs, we determine liquidity needs and the requirements for a sound capital structure through the use of integrated financial planning. This creates the foundation for a financing concept that optimally weighs the interests and decision-making freedom of all participating parties.  

Methodological and professional assistance with implementation

Oliver Wyman has a broad base of knowledge about industries and methodologies that it uses to help carry out restructuring projects in a quantitatively-based and methodical manner. This includes:

• Strategy & Growth
• Sales Efficiency
• R&D Productivity
• Production Optimization
• Lean Management
• Procurement & Supply Chain
• IT & Operations
• Organization & Processes
• Mergers & Acquisitions

Program management and communication

Careful monitoring of the project's implementation is the key to its success. Another vital step is to keep all stakeholders up to date about the status of implementation and to transparently report potential problems. This enables barriers to implementation to be identified at an early stage and then removed. Oliver Wyman assists with the implementation of restructuring programs in a number of ways, including:

• Monitoring of the implementation and the achievement of planned improvements, using a Web-based program-management tool if necessary.
• Regular reports to management, owners and financial stakeholders about the latest business performance (sales, earnings, liquidity) as well as the implementation status of the project, potential problems and necessary responses.
• Ongoing liquidity management (including rolling liquidity projections, liquidity-bolstering steps and potential problems).
• Support of communications activities about the restructuring program within the company and to external stakeholders.

Profitable growth and the continuous adjustment of the business model are a key challenge for the management of manufacturing companies. Value Driven Business Designs developed by Oliver Wyman are based on the analysis of value shifts within an industry. This analysis enables the identification of future profit zones that are systematically developed by means of alternative business models. Successful strategies for manufacturing companies can assume very different types: from a strict focus on component manufacturing, to downstream strategies concentrating on comprehensive solutions for the customer up to innovation strategies.  

The Oliver Wyman Industrial Products team has extensive experience in the implementation of new business models in manufacturing industries. This comprises of:

• Creating new customer value through demand innovation
• Product portfolio optimization, for instance, with intelligent product bundling or via profitable service strategies
• Securing the technological leadership and building a superior product development
• Customer management and key accounting
• Utilizing hidden assets such as know-how on customers, installed base, or brand strength in order to develop new growth opportunities  

Oliver Wyman has developed and successfully implemented sustainably profitable growth strategies for many companies. Our contribution is our unique combination of distinctive industry know-how and comprehensive methodological expertise:

• Exact understanding of the manufacturing industry and its target markets
• Methodological expertise (such as, for example, the Value Driven Business Design methodology)
• Many years of experience developing and implementing growth strategies
  

The sales & after-sales activities of many companies operating in the industrial environment still hold significant improvement potential. Management still focuses too strongly on development, production, and assembly (upstream segments) and neglects other segments. Because purely technology-based product differentiation is becoming increasingly difficult and also harder to communicate, management must emphasize sales & after-sales topics more and more. The most important areas of action are utilization of after-sales-opportunities by downstream businesses like spare parts, service, financing, and maintenance as well as increasing sales effectiveness.  

In many instances, after-sales is not industrialized as a separate business. Consequently, it is not supported, operated, and managed by the appropriate (global) processes, organization, leadership, systems, and tools. By implementing the appropriate downstream business designs, it is possible to achieve EBIT margins of 10 to 20 percent – a fact that most companies are aware of. However, these companies find it difficult to realize their earnings and growth potential. Only 25 percent of companies earn more than 20 percent of their revenue with downstream business activities (spare parts, service, financing, maintenance, etc.).  

Oliver Wyman has developed a systematic approach for identifying and evaluating downstream opportunities. The following are the core elements of this approach:

• Rigorous analysis, including evaluation of the market potential of downstream business segments and the prerequisites for unlocking this potential
• Analysis and evaluation of the processes and the current performance of the downstream business, e.g. by conducting benchmark studies
• Development of an expanded value proposition for the customer as well as the necessary internal process parameters (KPIs)
• Preparation of a detailed business plan which incorporates possible growth opportunities and the necessary investments
• Definition of measures and detailed implementation plans to build the required competencies, processes, systems, and structures  

A second large area of action for industrial companies is to improve the performance of their sales operations (sales effectiveness). This is rather a dire necessity than an opportunity. Customers have become more demanding and increasingly require a sales process that is more geared to providing advice. In addition, more and more sales staff can no longer deal with the growing number of products, and is unable to market differentiating innovations adequately - a major risk in stagnating markets. Channel conflicts between suppliers and distributors can hamper the sales process as well. Furthermore, companies usually lack efficient processes and sales management tools - a deficit which can easily grow exponentially in a globalized world. Most salespersons, for example, spend far too much time on activities that do not create much value, and too little time with the customer.

From our perspective clearly defined levers exist and these levers can significantly improve sales performance:

• Strategic focus: Which are the most profitable and attractive customer groups? What are the best channels for serving them? What value proposition is differentiated in the long-term?
• Sales processes / management: How can the organization and processes be optimized? How can the sales staff be adequately allocated? Who assumes which role?
• Infrastructure / systems: Which are the appropriate management indicators? What is the best compensation and incentive system? Which tools and training methods are suitable?  

In the last five years, Oliver Wyman has supported many sales effectiveness projects for a broad range of clients. The following are some representative results:

• Increase in sales by 10 to 20 percent and concurrent staff reductions
• Increase in sales rate by 250 percent
• Improvement of average margin per customer by 50 percent

In its competence areas Mergers & Acquisitions and Post Merger Integration, Oliver Wyman offers extensive value improvement opportunities by means of a unique combination of in-depth industry knowledge and long-term experience in the international transaction business. Our services for corporate clients from industry, i.e., strategic investors, are complemented by a tailor-made consulting offering for financial investors in the area of Private Equity as well as Distressed Debt and Mezzanine.

The main focuses of our M&A consulting service comprise:

M&A Strategy: Portfolio analysis, implementation of cross-border growth and diversification strategies or value-improving “Buy and Build” approaches

• Divestments and exit preparation: Preparing IPOs, as well as sales processes, achieving value improvements in divesting subsidiaries or bordering activities with our innovative High-Value Divestment approach
• Integrated M&A Management in the Mid-Market area: Smooth process management from the identification of acquisition targets to due diligence, transaction handling, up to the subsequent exploitation of synergies during integration
• Supporting critical parts of the transaction process: Developing independent due diligence reports on commercial, strategic, and operational issues, quantification of synergy potentials, developing consistent business plans, company assessments, sales documentation, etc.  

These services are complemented by Value Merging – our strategic approach to successful Post Merger Integration: In the case of mergers and takeovers that took place in recent years one is struck by the fact that 60 percent of companies were unable to integrate their new partners successfully in their own organization. The lessons learnt from these failures: While the value of an acquisition depends on many aspects, there is one central factor that decides on its success – a systematic and professionally planned and conducted Post Merger Integration (PMI). In order to support medium-sized and major integration processes, Oliver Wyman developed an approach that above all realizes the Operational Excellence and the set-up of a homogeneously integrated overall company. The Value Merging approach makes the complexity of the take-over process manageable, thus creating the prerequisites for a sustained generation of additional corporate value.  

Due to our expertise, an increasing number of demanding customers has decided to work with us over the past years:

• Our in-depth industry understanding and international relationship network enables us to achieve a decisive time and quality advantage for our clients, even in tightly timed transaction processes
• Our fact-driven, analytically rigorous approach enables us to rapidly identify relevant value drivers, for example, in the development of integrated financial models, or in the forecast of medium-term market developments
• Our long-term experience and proven methods also enable us to solve complex issues in the transaction business  

Market shifts, new competitive structures, and adjustments of the business model change the requirements towards an organization. Frequently, it is necessary to change historically grown structures and processes, in order to align the organization optimally to the success factors of the business.

Oliver Wyman conceives an organization as a system consisting of four critical elements:

• Organizational structure: Definition of roles and responsibilities within the organization. Separating business units from cross-sectional functions (divisional vs. functional units). Adjusting the legal structures and staffing of committees.
• Processes: Defining the interaction of organizational units in the core processes. Optimization of processes and interfaces. Defining the information flow between people involved at essential milestones within the process. Deployment of tools and IT systems.
• Target systems: Setting cross-organizational strategic and financial targets. Developing corporate values and cultural elements. Selection of financial and operational KPIs for controlling the business.
• Management tools: Determining the composition and tasks of the management levels within the company. Designing management tools, such as Target Setting, Planning, Controlling & Review. Introduction of systems for measuring the performance of organizational units.

Oliver Wyman has accompanied various change processes in companies of varying sizes. Our unique contribution consists of the applied combination of content and methodological competency:

• In-depth understanding of the business and the related requirements towards the organization
• Comprehensive experience regarding the focus topics of a change process and potential pitfalls
• Numerous benchmarks and best-practice examples
• If required partnering with our specialized sister and daughter companies Mercer, Oliver Wyman - Delta and Oliver Wyman Leadership Development

Oliver Wyman's Global Risk & Trading practice enables the world's top industrial corporations and commodity trading organizations to gain competitive advantages by assisting them with managing risk across their businesses more effectively. By working with global leaders in a broad range of industries, our practice has developed unique capabilities that help industrial corporations and commodity trading organizations create value and maximize their performance by making risk-adjusted strategy, investment and capital allocation decisions.

Our practice works with clients to measure and manage risk at all levels within their organization - from the board and executive suite to line management. Drawing upon resources from across our division with decades of specialized expertise in risk management as well as the deep knowledge that partners in other parts of Oliver Wyman possess of specific industries, regulatory issues, economic trends and leadership development, we anticipate unprecedented challenges in our clients' competitive environments and deliver comprehensive customized solutions quickly that improve their operations and risk-return profile.

Corporate Risk

Our practice supports top corporations in embedding risk and volatility management into decision-making processes across their organizations. Whether strategic, counterparty, commodity or large project risks, we offer advice on the frameworks and best practices that improve a company's financial performance by improving its risk-adjusted decision making.

Commodity Trading

Leading commodity traders count on our practice to create the risk-adjusted infrastructure necessary for their organizations to optimize value. We support our clients on all matters related to the risks they encounter in their business ranging from building trading processes, tackling strategic challenges, to establishing an appropriate governance structure and the required risk methodologies.

Key Areas of Insight

Mechanical engineering faces very specific challenges:

• Global markets and customers, with partially strong negotiation power
• Global competition, industry consolidation, and the emergence of suppliers from emerging countries
• Tension between the necessity for innovation on the one hand, and for permanent cost optimization on the other
• Increasing complexity, increasing risks, and overall, too little profitability  

To overcome these challenges, mechanical engineering companies can address several areas of action to increase / sustain their sales volume and to reduce costs continuously:  

• Realizing growth in core markets through innovations with the objective to increase efficiency of customers
• Exploiting new growth markets through investments in BRIC countries, and consistent utilization of consolidation opportunities to improve competitive position
• Globalization of value creation, thus enabling the exploitation of new markets, and the utilization of cost advantages from low-cost-countries
• Holistic reduction of product costs, which typically comprise more than 60% of the total costs, through comprehensive and multifunctional approaches
• Consistent improvement of productivity and flexibility, in order to secure competitiveness and decrease reaction times in the context of demand fluctuations  

Oliver Wyman has more than 20 years of experience in restructuring and realignment of mechanical engineering companies. More than 70% of the leading mechanical and plant engineering companies are our customers. On the restructuring side, we have specific experience in comprehensive restructuring, the reduction of production and overhead costs, in process optimization, in sourcing and reorganization. On the growth side, our expertise lies mainly in execution of comprehensive growth programs, expansion of the downstream service businesses, sales, value pricing, development of new markets, and Mergers & Acquisitions.

For international plant engineering companies, the global market has been reality for decades. Growth is mainly driven by BRIC countries and the gulf region. Additionally business is characterized by the continuous increase of individual project volumes and a rising scope of responsibility for the manufacturers with respect to general contracting and turnkey solutions. At the same time internal value add is decreasing more and more, as either the customers demand “local content”, or sourcing in low-cost countries becomes indispensable in establishing competitive cost positions.  

The modified market conditions pose new challenges for the management of plant engineering companies:  

• Introduction of a comprehensive risk management, from project selection onwards
• Professionalization of project management
• Focusing of resources on core competencies
• Realizing a global cross-location order processing chain with corresponding systems support  

To overcome these challenges, plant engineering companies can address several areas of action:  

• Exploiting new growth markets through investments in BRIC countries, and consistent utilization of consolidation opportunities to improve competitive position
• Continuous improvement of project management to ensure an efficient project handling
• Globalization of value creation, thus enabling the exploitation of new markets, and the utilization of cost advantages from low-cost-countries
• Holistic reduction of product costs, which typically comprise more than 60% of the total costs, through comprehensive and multifunctional approaches
• Complexity reduction through modular design of products, reduction of number of variants and clear definition of interfaces
• Consistent service orientation, to fulfill customer requirements cost-effective and to ensure customer retention  

Oliver Wyman has more than 20 years of experience in realignment of plant engineering companies to profitable growth and in adaption to new market conditions. Most of the leading plant engineering companies are our customers. We have specific experiences in holistic restructuring, reduction of product and overhead costs, optimization of processes, sourcing and reorganization. On the growth side, our expertise lies mainly in execution of comprehensive growth programs, expansion of downstream service businesses, sales, value pricing, development of new markets, and Mergers & Acquisitions.

Today, automation technology is crucially important in many application areas. In the past, innovation led to significant improvements in productivity, security, and energy efficiency in many industries. This can also certainly be expected in the future. However, a certain degree of maturity can be recognized in the industry, and companies have to adapt to this:  

• Growth rates in overall automation technology will adjust more and more to the growth rates of their consumer industries. Therefore, some technology segments, such as sensor technology or renewable energies, will show above-average growth.
• Significant regional shifts are visible, and growth will increasingly be expected to come from markets like China, India, and Eastern Europe.
• Customer requirements, which are already very heterogeneous, will become even more so: Increasingly, we will see a trend away from products and toward systems, but also to lower-cost products and solutions.
• Global competition is intensifying. Apart from established western technology and premium providers, more and more low-cost providers, such as the Chinese, are entering the market. Even if their primary markets are still the local markets, exports are increasing.
• A tendency for consolidation, which has been recognizable for several years, is sure to strengthen further. The various players’ strategic perspectives still might differ here. However, the recent economic crises will speed up the consolidation process.  

Automation providers must respond to these developments, and adjust their business models in terms of strategy and operations. Core elements to be considered are:  

• Client selection in a global context: What market segments are attractive and reachable in a sustained way? Which customer requirements can be met? How can differentiation from competitors be successfully achieved? How can this aspect be addressed in the context of global markets and more diverse customer requirements? What are the correct sales structures and distribution channels?
• Value proposition and product portfolio: What systems, products, and technologies are needed in the target segments? What are the implications for the R&D roadmap? What are the implications for the branding of products (high-end versus low-end product line)?
• Profit model and strategic control: In the face of constantly changing customer requirements and technological possibilities (standards, openness), what profit model will generate sustainable cash flows? How can sustainable strategic control be achieved?
• Global production network and value creation: What steps belong in the value chain, and what should the future production network look like? How can the - mostly required - localization of products and the underlying value creation and sourcing structures be achieved? Which agreements and alliances make sense?
• Organizational systems: What organizational adjustments are needed to control the globalized business? How could a proper balance between resources in core markets (e.g., China) and headquarters be achieved?  

Oliver Wyman has in-depth knowledge of the automation industry and comprehensive experience in its strategic and operational issues. We utilize a worldwide network of experts in Europe and Asia, in the Middle East, and in North America. In addition, our teams benefit from the know-how of other Oliver Wyman industry experts serving the automation industries’ customer segments, such as the automotive, manufacturing, and process industries.

Due to the recent sales crisis, the business trends in the commercial vehicle industry have become more pronounced. These include more competition in a strongly concentrated industry, increasing professionalization of dealer structures, and a continuing cost-orientation of customers adding to already strong margin pressures.

In 2009 traditionally cyclical markets in the United States and Western Europe reached sizes last seen in the 1990s. The current downturn in Western Europe shows the strongest historical decline ever, and the emerging commercial vehicle markets in Eastern Europe have also declined rapidly.  

A quick recovery of the commercial vehicle markets is currently not expected. Over the next few years structural growth is expected to take place mostly in Asia; the European market is not expected to return to its 2007-2008 size anytime soon.  

Therefore, companies in the commercial vehicle industry are being confronted with a profound and sustainable shift of global demand toward emerging markets.  

As a result, the commercial vehicle industry is facing far-reaching structural challenges.

In order to respond to these challenges, companies can address the following key areas to increase revenue and sustain profitability:  

• Sustain or increase market share in traditional European markets through customized offers and professional sales and service
• Adjust (Western European) company structures to match sustainably achievable sales volumes
• Participate in the market growth of emerging countries, especially in BRIC countries, to improve the overall competitive position (e.g., form strategic partnerships, acquire manufacturing facilities)
• Optimize cost structures through comprehensive reduction of product and overhead costs as well as through flexibility improvements
• Improve margins by extending attractive after-sales and downstream businesses  

For many years Oliver Wyman has worked successfully with the leading manufacturers of commercial vehicles, for their suppliers, and for service providers in the commercial vehicle industry. Oliver Wyman helps its clients address strategic issues like comprehensive optimization of business models or development and implementation of sustainable product, market, and sales strategies. We also have broad experience in cost-efficiency improvement and restructuring, as well as in sustainable reduction of product-related costs. In addition, Oliver Wyman regularly supports strategic and financial investors in valuation and M&A activities focused on the commercial vehicle

In recent years renewable energy has become more and more important, and this trend is expected to accelerate. Though wind and solar energy have become essential technologies for the future, manufacturers of facilities and components for the generation of wind and solar energy are faced with dynamic market conditions:

The high-tech industry is one of the most demanding markets of all. Companies have to deal with numerous challenges, including:  

• Cyclical consumer markets
• Very short innovation cycles
• Capital-intensive production
• Pressure from OEM customers
• Intensive global competition  

At the same time, dynamic markets continue offering opportunities for a significant improvement of the market position by means of innovations or changes to the business model. In many cases, the high-tech industry enables above-average growth and profitability.  

The key to make use of these opportunities is focusing on selected target segments and the consistent orientation of the business model along the requirements of the target segment. Oliver Wyman supports these transformation processes with a four-step approach:  

• Strategic focus: What high-tech market segments are attractive and reachable? What customer requirements can be met? How can differentiation from competitors be successfully achieved?
• R&D portfolio: What systems, products and technologies are needed in the target segment? Which of these have to be developed in-house? Which strategic development partnerships are necessary?
• Manufacturing structure: Which steps in the value chain have to be covered from a strategic and financial point of view? Is a proprietary production required at all, or are partnerships with CEM / EMS companies to be preferred?
• Business model: What organizational adjustments are necessary to reduce the decision-making process and maximize the capacity to act in the market?  

Oliver Wyman has a worldwide network of high-tech experts in North America, Europe, and Asia. In addition, our teams utilize the knowledge of other Practice Groups in the consumer industries of the high-tech industry, for instance, communications, computing, automotive, and manufacturing industries.

After several years of strong growth, the global agriculture & construction equipment industry was severely affected by the financial and economic crisis of 2009. Most affected were manufacturers of construction equipment in traditional large markets in Western Europe and North America. In contrast, manufacturers in emerging countries have shown continuously strong growth rates, but their growth is not strong enough to compensate for the losses in industrialized countries.

In the context of the global crisis, companies in the agriculture & construction equipment industry are faced with several challenges:

• Sales decline, especially in industrialized regions
• Margin decline, for both new equipment as well as for the traditionally high-margin parts business
• Cost-structure disadvantages in manufacturing compared with low-cost countries
• Increasing competition by aspiring players from emerging countries  

Nevertheless, the crisis offers an opportunity to ensure sustainable success by conducting major adjustments business models. The areas of action for a promising re-positioning cover a wide range of potential improvement levers:

• Participation in market growth in emerging countries 
• Investments into sales and service networks
• Hedging of parts business against Internet competitors and against fake parts
• Reduction of product costs
• Globalization of manufacturing footprint using an intelligent mix of greenfield investments, mergers & acquisitions, and joint ventures  

The successful re-alignment of the business model requires deep insights into relevant markets as well as proven methodologies and tools to develop and implement the necessary changes. Having conducted multiple studies and extensive analyses across the agriculture & construction equipment industry, Oliver Wyman is a qualified partner for these tasks. Leveraging project experiences from many years in this industry, we identify the right answers to all relevant questions about the future development of a company’s business model. Together, we work with our clients to successfully implement the recommended changes: 

• Positioning in the market: Which target markets and customers guarantee sustainable success? How should the service offering be designed and differentiated to serve target markets and customers in the best way?
• Profit model: Which developments and trends determine the relevant profit drivers? How should the profit model be designed, to ensure sustainable profitability?
• Competencies: Which adjustments to the current value chain are required? What degree of outsourcing ensures success? How can production capacities as well as the sales and distribution offering be strengthened internationally? What alliances and partnerships should be built?
• Strategic control: How is successful differentiation against emerging competitors possible? How can unique selling propositions be utilized better and more sustainably?
• Organizational architecture: How can the effectiveness and efficiency of an organization be improved? Which infrastructure best practices and corporate-culture attributes support a company in achieving its objectives?  

Producers of materials and components face several ambitious challenges:

• Strong dependency on the highly variable economic situation of the construction industry
• Strong competition and strong consolidation in the industry, partially driven by financial investors
• Continuously rising requirements on companies’ efficiency  

In order to respond adequately to these challenges, producers of materials and components can address several key areas of action:

• Efficient cost management through fixed cost optimization, working capital management, and reduction of material costs
• Building a competitive product portfolio, taking emerging complexity costs into account. Besides pure product offerings, differentiating services and solutions offer particularly compelling opportunities of profitability improvement
• Optimized design of the value chain from the production and logistics network up to the management of sales channels  

Oliver Wyman has conducted a large number of projects for producers of materials and components, and has supported them particularly in the fields of sales and efficiency improvement. Based on a clear market segmentation and an understanding of future customer requirements, Oliver Wyman helps to identify optimization potential and to develop concrete adjustments to existing business models. Efficiency improvement projects comprise purchasing, production, and inventory management, as well as sales and service.