Operational Performance Improvement: Manufacturing Benchmark Study and Opportunity Assessment
Client
A fourth-generation Precision Machined Products Manufacturer serving automotive, heavy truck, and marine OEM and Tier 1 customers.
Situation
- One manufacturing facility faced with 15% reduction in sales which shifted product mix from high volume – low mix to low volume – high mix
- Variances exceeded standard cost by 25%
- Performance was flat or declining across key performance measures
- High defect, scrap and rework rates resulted in unacceptable PPM, poor customer quality and $1.2 million in cost of quality (COQ)
- Out of date asset base was unreliable and expensive to maintain as maintenance spent 89% of its available time and budget addressing mechanical failures
- $11 million addressable cost base
- Projected to lose $1.5 million
Solution
- Board of Directors engaged BlueWater Partners to conduct a plantwide benchmark study to validate the company’s standard cost model, identify performance gaps and develop an improvement roadmap
- Completed 2-week benchmark study to assess current state operational performance, identify key cost drivers, and determine Achievable Standards
- Prepared high-level analysis of projected financials based on historical performance and projected efficiencies to support greater than 5x return on investment
- Developed Improvement Roadmap with high value projects, key assumptions, financial impact and timing
- Established one-year and three-year targets that, when achieved, clearly positioned company as a model manufacturer with world class manufacturing systems and practices
Result
- New standard cost model was sound with 2% variance in quoted standard versus operating standard
- 22% variance resulted from non-value add (NVA) activities across direct and indirect categories, as charged labor and paid labor differed
- Improvement Roadmap reduced the addressable cost base by 32% over 24 months
- $3.5 million savings annually
Published with client permission
