Our Client
A fourth-generation Precision Machined Products Manufacturer serving automotive, heavy truck, and marine OEM and Tier 1 customers.
The Situation
One of the company’s manufacturing facilities experienced a 15% decrease in sales, leading to a shift in product mix from high volume-low mix to low volume-high mix. As a result, variances exceeded standard cost by 25%. Key performance measures showed flat or declining performance. Additionally, high defect, scrap, and rework rates, which resulted in unacceptable parts per million (PPM) and poor customer quality, cost the company $1.2 million in cost of quality (COQ). The facility’s out-of-date asset base was unreliable and costly to maintain, with maintenance spending 89% of its available time and budget addressing mechanical failures. The addressable cost base for this facility was $11 million but projected to lose $1.5 million.
The Solution
The company’s Board of Directors hired Cascade Partners’ Performance Improvement Team to conduct a comprehensive plantwide benchmark study. The goal was to validate the company’s standard cost model, identify performance gaps, and create an improvement roadmap.
In just two weeks, our team completed the benchmark study, assessing the current state of operational performance, identifying key cost drivers, and determining achievable standards. The results were used to prepare a high-level analysis of projected financials based on historical performance and projected efficiencies, supporting a return on investment greater than 5x.
Our team developed an improvement roadmap, highlighting high-value projects, key assumptions, financial impact, and timing. The roadmap established one-year and three-year targets that would position the company as a model manufacturer with world-class manufacturing systems and practices.
The Cascade Advantage
Our Performance Improvement Team created a more accurate cost model that only varies by 2% between quoted standard and operating standard. The team’s analysis found that 22% of the variance was due to non-value add activities in both direct and indirect categories, where the charges for labor and pay differed. By implementing an Improvement Roadmap, we were able to decrease the addressable cost base by 32% within 24 months, which equates to an annual savings of $3.5 million.