Rapid EBITDA Improvement
The new owner of a large manufacturer of promotional products hired Oliver Wyman to help them significantly improve their operational performance.
Oliver Wyman proposed to identify and size and implement EBITDA improvement opportunities in procurement spend (direct + indirect), and to conduct a diagnostic to identify potentials for cost savings in the different manufacturing plants.
On the procurement side, Oliver Wyman was asked to champion the execution of sourcing activities across 24 cost categories.
On the manufacturing side, the project focused on technical assessment on the shop floor within plants as well as network optimization, i.e. relocation of plants and rightsizing of the network with the objective to develop an improvement roadmap both from a strategic and shop floor perspective.
The procurement improvement program followed a two phases approach:
First, the Oliver Wyman team conducted a rapid diagnostic on procurement spend by cost category in order to identify improvement potential and relevant sourcing levers. A maturity assessment of the procurement organisation was performed to identify how to align the operating model to ensure sustainability of procurement savings initiatives.
After stakeholder’s alignment on the sourcing cost reduction objective, the project team coordinated and ran direct negotiations with suppliers as well as complete RFP processes in order to reach the savings objective.
In parallel, the project team conducted several plant visits in a short time frame across the client’s plant network, spending a day per plant with management interviews and shop floor visits, assessing the capabilities and performance of the individual sites.
Then they sized potential opportunities jointly with the client manufacturing executives as well as with controlling and HR departments. In addition, several workshops with key client stakeholders were held to align on opportunities and next steps
Oliver Wyman created transparency on the spend by cost category and subsequently identified and validated an impact of 15 percent on sourcing opportunities. Besides financial improvements, we help the client to improve processes and organizational structures and to enhance transparency on spend.
Additionally, the identified potentials of manufacturing opportunities represent an impact on manufacturing costs by 5 percent with an implementation time of less than two years.