Case Studies

Industrial OEM- Product Margin Expansion

Challenge

A pump OEM conducted product portfolio analytics and identified a loss leader product. The product was a market leader, but the competition had entered the market with lower priced offering and were continuously capturing market share and putting price pressures on the leader. The challenge was to take 20% cost out from the product without compromising customer expectations, keeping serviceability features and footprint for install base compatibility.

Outcome

A detailed costed bill of material structure & function analysis of the product was conducted. Competitive tear down, cost and function analysis and a cross functional value engineering workshop were completed. 12 ideas were prioritized and approved for final cost reduction, delivering 35% margin expansion. Quick wins started in 6 months, the process was scaled up by the business and applied to other product platforms.

The outcome accomplished above target product margin and enabled the business with best price position in the market.

PE Owned Consumer Product – EBITDA Uplift

Challenge

A Private Equity-owned global Consumer Products Company, planned to consolidate US assembly operations with its China operations to leverage underutilized buildings, equipment, and people. The objective was to reduce the high US and China fixed overhead costs to improve profitability in their respective markets. Unfortunately, the product fell under trade tariffs imposed by the US on Chinese imports which offset all planned savings.

Outcome

Original engagement changed from offshoring to China, to remaining US-centric with EBITDA uplift. A strategy of COGS and supply chain cost reduction was adopted. In addition, a unique approach to Bills of Materials analytics and benchmarking competitive product costs provided insight to the business to improve product gross margin with high confidence.

Within a year, 2.5% margin expansion and EBITDA uplift were accomplished earlier than the original program, with one-tenth of the cash outlay, and without disruptions to operations.

Financial & Retail Tech Company Eliminates Price Pressure in Asia Pacific

Challenge

A cash dispensing system OEM faced negative margins and were under competitive price pressure in Asia Pacific. Their main hurdle was the functionality and features in the imported product were misfit for the market and kept the price above market bid. Regional competition continued to entice customers away with low price and a product closer to market needs.

Outcome

Competitive tear down and cost analysis determined base costs. Cross functional workshop was conducted to discover cost reduction opportunities in product specifications, product design and supply chain. A grounds up approach yielded ideas for cost reduction of 27%.

A regionally fit, price competitive product was developed and launched in the market in 12 months.

Diversified Industrial Offsets Commodity Inflation

Challenge

A diversified industrial business unit experienced annual margin erosion of 2%-3% driven by commodity price inflation and foreign exchange fluctuations. The ask was to implement a program which would yield a year over year, minimum 5% cost reduction on annual spend of $1B on commodities and supply chain.

Outcome

A program was developed to assemble a multi location, multi products and multi region portfolio. Change management process was deployed to ensure buy-in and accountability from all stakeholders: from leadership to the team on the ground. Opportunities were continuously generated through workshops to reduce direct material and labor costs. Program rigor was maintained by regular tracking and reporting of initiatives execution.

The program yielded year over year direct material cost reduction of 9%, and reversed gross margin erosion to gross margin expansion.

Financial & Retail Tech Company Increases Services Margin

Challenge

Service and technical support of an install base of more than 200,000 machines was a key differentiator for a cash dispensing systems OEM. As a gross margin expansion strategy the leadership decided to focus and optimizing annual spend on service parts and labor. The ask was to continue to deliver machine uptime above SLA, and expand service margin by 5%.

Outcome

An approach of service data analytics was adopted to discover opportunities of material and labor cost reduction. Service call data analytics provided insight into frequency of repairs, mean time between calls, high usage parts, technician experience, locations with high call rates and additional metrics.

A predictive and preventive maintenance vs. breakdown service call program, and warehouse/service van inventory management provided the business a validated 15% service margin improvement road map.