Challenge
An automotive OEM had experienced a major shift in demand towards new types of product. Demand for established products declined dramatically.
The company reacted to these changes by shifting production to low cost countries. In the remaining high-cost site productivity improvement for direct labour was consistently being addressed, but little attention was paid to the indirect labour. Thus the situation became out of balance, and Axisto was invited to explore indirect cost-cutting opportunities
Approach
There are two basic ways to approach cost cutting: targeted and zero-based. As our client was facing major, and quite disruptive, change, they needed a comprehensive approach. Our Zero-Based Alignment (ZBA) provides the better way to radically redesign the cost structure of a business, and this was the chosen approach.
Together with the client team, we turned their deep understanding of the market into a sharp new vision and aimed high with a cost reduction target of € 10 million. After sufficiently understanding the current activities and cost structure, we designed an ideal state from a blank sheet of paper; fully aligned with the vision. Activities were consolidated, the organisation was delayered and built along the end-to-end process. Even after applying the practical boundaries and business risks, the vast majority of the ideal-state design survived the final approval.
Results
- €12.7 million cost reduction (annually recurring).
- 47% indirect productivity improvement.
- A clear, energising vision that reflected the evolving market conditions.
- An aligned, redefined end-to-end process and a de-layered organisation with self-steering teams throughout the process.
- A site with a new and stimulating future (closure plans were ditched).
