Plant engineering & construction
The financial crisis has spread to the real economy and is now also having a severe impact on Germany's engineered products sector. Forecasts about how long the crisis will last and how bad things will get are changing constantly, fueling uncertainty and making it difficult for companies to come up with a focused response.
To deal with such adverse conditions, businesses need to explore a variety of scenarios and prepare plans of action for every eventuality. This will give them sufficient freedom to respond less hastily to future developments – and to exploit the opportunities afforded by the crisis.
In brief
In recent years, the German engineering sector has increasingly invested in ramping up capacity, driving innovation and advancing internationalization. In the process, it has accumulated heavy structural costs all along the value chain. Now that production volumes are in decline, these costs are significantly eroding earnings.
The main reason why it is so difficult for companies to cope with the current market situation is that it seems impossible to predict order intake with any degree of certainty. Forecasting becomes more or less problematic depending on the business model and a company's position in the value chain. Manufacturers of complex industrial systems are benefiting from the generally long-term nature of projects in their segment, which also means that their order books will stay filled for longer. On the downside, however, more and more of these companies are seeing existing orders canceled as money runs short.
Many manufacturers have already used up their stock of orders in hand. The challenge now is to adjust structures and costs in a way that lets them still make a decent profit even while doing less business, and to stay as flexible as possible for the future.
Our approach
Together with our client, we first put together a balanced product portfolio that meets market requirements and reflects strategic goals. We then leverage cost potential, particularly by optimizing the global footprint and adjusting vertical integration. The product portfolio is also optimized with the help of our sales-boosting methods.
To ensure our clients can handle the special challenges of major construction projects, we place particular emphasis on contracting. This involves professionalizing project cost monitoring, establishing systematic risk management and expanding claims management in a targeted way.
Sample projects
Optimizing value creation and location structure
Together with a producer of forming facilities, we agreed on sales and profit targets for each product division. The first step was to adjust personnel capacity in all companies to the standards set. The proportion of outsourced work in design, manufacturing and assembly was also optimized. The location structure was improved by shifting some manufacturing and assembly tasks to Eastern Europe. Finally, to clearly define the individual application areas, we formed business units based on product groups. These business units then took over responsibility for product management, order processing and design.
Program to improve sales and profits
A power plant manufacturer's output and profits were in freefall. To boost EBIT, we developed an action plan for sales and costs. This involved realigning the product portfolio to focus on high-tech products, and value creation was optimized in terms of vertical integration and locations. We also professionalized the handling of major projects. In particular, we established standard procedures and tools for preliminary and final project costing, while at the same time professionalizing technical project cost monitoring to document services and monitor deviating costs. In addition, we developed a risk management system and risk checklists for various stages of the project, and expanded the existing range of claims management tools.
