Global footprint design
To remain competitive, companies have to redefine their value creation structures. To this end, they combine all aspects of the value chain at the most efficient and effective locations.
For industrial companies, the rules of globalization have shifted fundamentally. Sales markets for industrial goods are growing mainly in the emerging economies of East Asia and Eastern Europe. As a result, manufacturing quality and productivity in these regions is becoming comparable to Western standards. Offshoring low-tech, labor-intensive production to reduce labor costs is therefore no longer the sole focus of attention.
To remain competitive, today's companies must redefine their global footprint – how and where they add specific types of value. Consequently, they are pooling value chain links at locations where specific functions can be executed most efficiently. They are also bundling production and assembly activities as well as development, design and administration. In the process, they are integrating each site into a global value network.
Even today, many attempts to optimize the structure of value chains concentrate exclusively on comparing factor costs, which fails to take the big picture into account. To respond to this shortfall, we go considerably further in our top-down approach for global footprint design.
This approach to optimization can reduce manufacturing costs by up to 20%, while increasing ROCE by up to ten times.
Optimizing value chain structures
We helped a leading electronic components manufacturer for the automotive industry adapt its value chain structures. As a result, ROCE increased from 2% to 25%. Production costs were lowered by 18% and capital employed by 19%. As a result, our client is now better prepared to face growing cost pressure from OEMs.
Reducing production costs
A company in the chemicals industry wanted to optimize its production network costs. In the three years that followed, we helped the client cut production costs by 12%. This was done by optimizing processes, making better use of existing assets and relocating production.
A leading maker of scents and flavorings wanted to optimize its global footprint. Our project involved selecting a new production location in Eastern Europe, consolidating sites in the Asia Pacific region and transferring the manufacturing of a number of products to countries with low factor costs. The client's costs were reduced by EUR 35 million.