The parent-company client wanted to leverage savings to expand market share in a highly competitive environment.
A diversified industrial manufacturing conglomerate hired KPMG LLP (KPMG) to understand the key cost drivers in a recently acquired company and to identify potential savings in reducing the company’s manufacturing and distribution footprint. While seeking efficiency, the client also wanted to maintain or improve product delivery times and enable 30 percent sales growth over the next five years.
Localized rationalization with a focus on labor arbitrage had already been performed, so KPMG’s challenge was to find synergies among four major business units of the acquired HVAC manufacturer.
Leveraging advanced analytical tools, the KPMG team created a baseline model that accurately reflected all manufacturing plants, distribution centers, product flow volumes, and total costs/financials. Then they designed a set of alternative footprint scenarios with the client company to compare against the baseline model. These scenarios were executed in the model in order to estimate potential cost savings versus the baseline along with impacts to customer service levels, plant and distribution center complexity, and production allocation between facilities.
KPMG also compared all facilities to assess their relative performance on direct/indirect labor costs and variable/fixed overhead costs. Company-wide adoption of the “best performing” plant’s standards offered additional savings.
Finally, KPMG developed a business case for the recommended scenario and operational improvements and, with the client team, created an implementation road map.