We began working with a leading US automotive interior company that designs and manufactures items like sun visors, armrests, headliners, seat back liners, and other products intended to make automotive interiors inviting as well as practical. The company has introduced several ‘firsts’ into the interior engineering world, including the first LED illuminated sun visor and several headliner innovations. As an award-winning company with global locations, the question of growth occasionally rises, including whether or not to acquire new assets. In this situation, the company called on us to help assess the possibility of acquiring a competing company.
In any industry, putting capital on the line to acquire and merge with a target company involves risk. Although this company was already thriving with locations in Germany, France, China, Mexico and Japan as well as in the United States, ensuring that its investment dollars were spent well was a top priority. There were several advantages to the possibility of acquisition, and the company needed to know what the likely outcomes would be if it moved forward.
With multiple manufacturing plants scattered across the United States, this company has to closely supervise lines of supply and production to manage expenses. Consolidating some of the manufacturing facilities in North America was considered as a strategy for creating more efficiency and reducing costs. Acquiring the target company would be an efficient means of consolidation as well as expansion.
We investigated alternative consolidation strategies, material flows and other actions to determine whether there were more cost-effective options. This included a detailed assessment at 6 individual facilities and as well as an on-site strategic consulting engagement. Every detail of the acquisition agreement was compared to other options to ensure that the company was making the best possible investment.
It was necessary for this company to work with the target company’s acquisition team to determine whether a plant floor layout could be created to meet the needs of the company post-merger. Likewise, it was essential to address associated building modifications, equipment and a material flow strategy to ensure that processes like materials delivery, shipping and manufacturing could align with the company’s overall strategy and work well for the consolidated company branch.
With assistance from us, the company brainstormed and developed a possible consolidated plant floor layout and material flow strategies. Best management practices were considered, as well as some alternative strategies and insights we provided from its other contributions in this industry. Six individual facilities were assessed, as well, and additional insight was provided by working with a strategic consulting firm.
The company needed to identify and optimize all the components of the acquisition deal in order to make sure the resulting cost structure would be viable and an asset to the overall company. Key components of the acquisition agreement needed to be compared against all of the possible options to create the best possible plan.
The company worked with us to identify weaknesses or sensitivities of the acquisition plan, as well as possible countermeasures that could smooth the merger process. Quality, delivery and people performance were assessed to further identify improvement opportunities in the overall cost structure. Again, the results were compared to alternative consolidation and expansion strategies to determine the best possible investment.
We identified and developed the company’s plans to consolidate manufacturing plants in the United States and Mexico. The resulting outputs estimated a 20 percent improvement in labor productivity, a 35 percent reduction in maintenance support, and a 50 percent reduction in scrap production. Equipment utilization was estimated to have a 65 percent improvement in uptime, and lead time and inventory were both estimated to be reduced by 25 percent.
The optimized plan included reducing the original floor space requirements by about 20 percent, which included moving from five buildings to three for the suggested consolidated plant layout. We analyzed equipment capacity and customer demand to determine the proper buffer sizes and inventory levels, suggesting an estimated 25 percent reduction in costs for carrying inventory. Layout plans and process optimization plans were both showed an approximate 20 percent improvement in productivity as well as a 25 percent reduction in work-in-progress.
We also developed various concepts and strategies to help streamline and optimize operations that were already in place. This included utilizing a ‘line back’ principle with a two bin pull system and timed delivery routes for restocking manufacturing materials. Material handling was reduced by 10 percent. First-time-through-quality, rework, repair and containment were all impacted by around 50 percent.