Case Study: Global Standardization, Heavy Equipment Manufacturing
This Case Study describes how Gagnon Associates helped a client achieve global standardization for a key product component category, resulting in significant, overall cost savings:
A 700MM+ worldwide maker of large-scale mining machinery and equipment.
Globally-dispersed operations from newly-integrated businesses result in a varied proliferation of key-component designs as well as disparate and sub-optimized supply-chain and production practices and processes. A long history of autonomy and sparse communication among these distributed operations compounds the integration challenge.
Global Marketing and Product Management sets out to rationalize designs of best-selling, high-volume components, beginning with highly-engineered roller parts used in mining conveying equipment. Representatives from operations in South Africa, Australia, the UK and the US come together at Global Headquarters to form the Company’s first, Global “Roller Rationalization” Team. Functions represented include Engineering, Materials Management, Operations and Product Management.
Roller Team members from each region arrive prepared to provide team members from other regions with a comprehensive roller status overview for their respective region, comprising information on roller models, designs, market volumes, sourcing and cost data. With this unprecedented global overview as a contextual foundation, and in the course of an intensive three-day work session designed and facilitated by Gagnon Associates consultants, the Roller Team identifies opportunities for global standardization and quantifies the resulting cost-reduction possibilities. Team recommendations include: the adoption of a “Global Roller Design Matrix;” documentation of global roller standards for manufacture, testing and quality assurance; the establishment of a permanent global standards oversight council; and global consolidation of sourcing practices.
All team recommendations are approved by Company senior executives before the close of the three-day session, and over the next three months, team progress in implementing their recommendations is both monitored and supported by senior-most Company leadership.
Cost-savings resulting from consolidated sourcing practices – dubbed by the Team “Money on the Sidewalk”– are quickly realized and amount to $500,000. The new Global Design Matrix rationalizes 86% of one of two roller “families” and 100% of the second. Key legacy products are phased out in favor of newer, more profitable designs. A new, “hybrid” roller is developed that promises to offer significant competitive advantage in the marketplace. All together, the project achieves $ 2,000,000 in recurring, year-to-year cost savings. Based on the Team’s experience and track-record with rollers, and in its new, permanent role as a “global standardization council,” members begin to advise management on follow-on rationalization projects, staffing and implementation.