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Managing Growth
Advanced Manufacturing
Managing Growth in Advanced ManufacturingMay 2014
Who we are
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� Win new business
� Cut costs
� Streamline business processes
� Manage people
� Boost performance and profit
Our objectives remain simple:
� To retain a single-minded commitment to results
� To build long-term relationships with our clients, so that we get to know their businesses and managers well
� To provide value-for-money in everything we do
We help firms to restructure:
Where we work especially well:
� Our wide range of disciplines means that we are particularly effective at implementing plans for restructuring and achieving challenging targets
� We work with major international corporations, and medium-sized businesses that make up the FTSE 250
Managing Growth in Advanced ManufacturingMay 2014
What we do
Our approach
Collinson Grant focuses on successful performance
We work on
Realinsight
Client’s closeinvolvement
Pragmaticapproach
Organisation
Acquisition, business integration, restructuring, organisational design, roles and accountabilities, and employee relations
Business Process
Business process re-engineering, managing change programmes, Lean and Six Sigma, exploiting ERP, and installing business controls
Costs
Direct costs, overheads, supply chain and operations, working capital, procurement, and managing complexity and performance
Small teams
Seasoned consultants
General managerial perspective
EconomicValue
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Managing Growth in Advanced ManufacturingMay 2014
Our experience in advanced engineering
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HAMWORTHYC O M B U S T I O N
Managing Growth in Advanced ManufacturingMay 2014
What’s happening out there …
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Global demand shifts to emerging markets:
the next billion consumers
New demand fromemerging markets
Rising costs and uncertainty in supply
Energy and transport costs: global transportation needs are outstripping investment in infrastructure
Commodity prices have risen, driven by demand in emerging markets
New patterns of demand: more fragmentation and an
increasing need for customisation
Changing business models: half of the value added from capital goods
now comes from related services
New materials: graphene, carbon fibre
Shift in relative labour costs: labour costs are rising faster than productivity in China
In product design: product lifecycle management systems, simulation
In production processes: automation, 3D printing
In information systems: ‘Industrial Revolution 4.0’, ‘big data’
New technology
Managing Growth in Advanced ManufacturingMay 2014
The facts and forecasts …
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72% of R&D investment in the UK was in the manufacturing sector(3)
41% of operational improvements over the next three years will come from Big Data analytics(5)
Sources: (1) 2013, McKinsey Global Institute, (2) 2012, HIS Global Insight, (3) 2012, RBS, (4) 2012, the EU, (5) 2012, The Economist Intelligence Unit, (6) 2011, BCG
Developed nations’ share of global manufacturing output fell from 73% in 2000 to(2) 54%
By 2015, the global market for ‘key enabling technologies’ will grow to more than(4) €1tr
The volatility of raw material prices increased in recent years by(1) 50%
55% (up to) of manufacturing jobs in the US are in functions which provide services(1)
By 2015, disposable income in China is expected to grow by(6) 230%
Managing Growth in Advanced ManufacturingMay 2014
Three interrelated core capabilities are of paramount importance in seizing opportunities and mitigating risks
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Product management
Customer relationship
managementProcess improvement
Open innovation
Cost leadership
Operational excellence
Organisational development
Supply chain management
Customer services
Leadership
Knowledge management
Managing Growth in Advanced ManufacturingMay 2014
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Product management
Product strategy
Product development
Lifecycle
management
Product marketing
Product management
� by using the data available to develop insight into customers
� by understanding customers’ requirements and priorities in the product-service mix
� by tailoring the product offering to specific markets, spotting high-value niches and where customisation can be profitable
� by introducing design-to-service approaches in new product development to sustain revenue streams through the lifecycle of products
� by actively managing a portfolio of innovations to maximize value for the customer, rather than over-engineering
� by accelerating the commercialisation of the innovation process: from product concept to product launch
� by ‘platforming’, standardising, and making product composition modular, enabling late differentiation and economies of scale
� by adopting value-based pricing strategies
� by tackling volatility in demand through actively managing product innovation and lifecycles rather than simply flexing production
� by investigating the suitability of alternative models such as assemble-to-order or engineer-to-order
� by spotting opportunities for long-term growth: technology trends and new markets
To ensure customer intimacy
To ensure a return on investment in R&D
To advocate long-term strategic needs
Managing Growth in Advanced ManufacturingMay 2014
� Rolls-Royce operates in highly competitive markets, providing power systems for land, sea and air. It employs more than 40,000 people in 48 countries. We have been working with senior managers throughout the business for ten years
� The Marine division employs c.2,000 engineers. We carried out a review of the effectiveness of the product management function throughout all its disciplines:
� Product marketing and technology
� Product and supply chain planning
� Product architecture and lifecycle cost
� Leadership and management
� We found challenges:
� divergence of products
� balance between innovation and cost control
� blurring of roles and disciplines
� approach to reducing the cost of products
� The analysis highlighted a structural weakness in the way the function was managed and how it operated throughout the organisation.
� We provided a framework for
� clarifying the accountabilities of product management roles and optimising use of resources
� resolving the root cause of deficiencies and optimising performance
� managing innovation
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Core capabilities: product management (2):Reviewing the effectiveness of product management
Managing Growth in Advanced ManufacturingMay 2014
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Supply chain management
Supply chain management
� by systematically conducting make-or-buy assessments product-by-product, but also market-by-market
� by using ‘total landed costs’ in procurement decisions and considering intangible factors in the rating of suppliers to reflect logistical and/or political risks
� by having contingency plans in place to swap critical components and switch between suppliers
� by partnering with suppliers and service providers� sharing risks and
rewards� involving them in
design, process definition and manufacturing activities
� by ensuring shorter payback time in capital investments to facilitate the migration of operations
� by adopting Efficient Consumer Response to ensure responsiveness of the supply chain to variations in demand
� by tackling complexity, recognising when it adds or destroys value
� by using all the available data to develop an insight into the supply chain (for example: preventative maintenance, operational data monitoring)
� by actively monitoring markets to capture opportunities created by volatility in supply
To ensure the business is agile
To ensure effective risk management
To focus on value rather than cost
saving
Managing Growth in Advanced ManufacturingMay 2014
� With 330 production sites, BASF employs 97,000 employees worldwide. BASF Polyurethane division is � No 1 in Systems – providing
application expertise� No 2 in Basic Products –
where the customer has application expertise
� The financial performance of the business was aversively affected by the banking crisis with a 32% fall in revenue between 2008 and 2009
� Collinson Grant was asked to evaluate opportunities to achieve sustainable improvements in profitability in a critical part of the value chain
� The project involved� assessing ‘make-versus-buy’
for some components� reducing complexity in the
product portfolio� reducing overall cost in
logistics
� Working jointly with BASF’s task force, we provided programme and project management support and used a structured approach to develop a Network Optimisation Model to cover� 3,500 systems formulations� 131 customer demand areas� 15 production sites
� The project identified optimisation options, structural changes, as well as ways to boost profit and how to implement them
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Core capabilities: supply chain management (2)Optimising the logistics network
Managing Growth in Advanced ManufacturingMay 2014
Customer services
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Customer services
� by understanding how customers create value; helping customers to become more efficient and involving them in the NPD process
� by understanding customers’ operations; helping them to use the product more effectively
� by understanding customers’ business models: helping them to maximise utilisation and reduce their total cost of ownership
� by ensuring that strategy is aligned throughout the organisation
� by embedding a culture of service alongside the orientation towards technology
� by defining how customers should be served
� by aligning product development with processes for designing services
� by setting up service KPIs alongside those for manufacturing and NPD
� by allowing the transformation to spread along the supply chain
� by developing a service portfolio which integrates products and services tightly, using:� subscription models� performance-driven
contracts� software-as-a-service� leasing of assets
� by setting up the appropriate controls for� a stable revenue
stream� monitoring the cost of
the solution over its entire lifecycle
To enhance customer intimacy
To transform into a service-oriented
organisation
To develop an offering as a ‘total solution
provider’
Managing Growth in Advanced ManufacturingMay 2014
� Wood Group Gas Turbine Services (GTS) is an independent provider of services to maintain, repair and overhaul gas and steam turbines and power generators. It also runs power plants for third parties
� Collinson Grant was asked to support the creation of an ‘affordable, accountable, agile’ organisation for GTS by
� the application of standard processes and adoption of common ways of working
� the creation of an integrated organisational structure
� Collinson Grant managed the design and development of a transformation of the business in the oil and gas and energy management markets
� The programme entailed work to:
� define the business rationale and business case
� define the needs of the business and its functions; and to draw maps of the future processes.
� map future roles to fit the work needed
� devise a strategy and integrated architecture for IS
� procure an Enterprise Resource Planning (ERP) system and manage an integration partner
� Subsequently, the business has grown by providing customised solutions throughout the organisation, at lower cost, to customers around the world
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Core capabilities: customer services (2)Steering organisational change
Managing Growth in Advanced ManufacturingMay 2014
Excellence in organisation, process and cost still remains the key enabler for competitiveness throughout the value chain
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R & D Supply chainProduction and order fulfilment
Sales and Marketing
After-market
Competitive cost structure
Globally integrated organisation
High-performance processes
Managing Growth in Advanced ManufacturingMay 2014
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Enabler: Globally integrated organisation (1)
� The business uses information to:� improve processes,� enhance products� allocate resources� disseminate
knowledge
� Integrated systems reduce the effort required for extracting, consolidating and producing data
� It supports the transparent communication of� performance
measurements� accountabilities� rewards
� It is designed so that� activity is undertaken
at the ‘right level’ in the organisation
� the structure ensures that accountability for actions is pushed to the lowest level practicable in the organisation
� It supports speedy decision making, effective knowledge sharing, and collaboration between teams
� It retains control of critical processes, knowledge, and IP
� R&D, manufacturing, marketing, sales and service organisations are globally integrated but localised
� Location should depend on:� lifecycle costs
(including exit costs)� proximity to demand
(for just-in-time, for example)
� availability of an established supply chain and technology hub
� regulations, subsidies, IP protection, tax
IT-enabled Efficient and effectiveDistributed capabilities
Globally integrated organisation
Managing Growth in Advanced ManufacturingMay 2014
� Low & Bonar, a London Stock Exchange-listed company, is the world’s largest performance materials group
� Low & Bonar announced a plan to create a single, scalable organisation by integrating two European subsidiaries:� Colbond, based in the
Netherlands and USA� Bonar Fabrics, based in
Belgium and Hungary and with a joint venture in China
� The combined company would be structured for growth in four geographic regions (EMEA, NAFTA, ASIA, LATAM), overlaid by three global business units (civil engineering, interior and transport, building and industry)
� Collinson Grant managed a programme of change designed to create a single integrated organisation with common ways of working. This entailed projects:
� to develop the sales and marketing strategy for global business units with a particular focus on routes to market
� to create and put in place a new organisational structure; to define the accountabilities and responsibilities of individuals; and to develop ways of working
� to highlight any opportunities to improve processes and reduce cost arising from the integration and to evaluate and mitigate risks
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Enabler: Globally integrated organisation (2):Integrating European subsidiaries in a single organisation
Managing Growth in Advanced ManufacturingMay 2014
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Enabler: High-performance processes (1)
High-performance processes
� The productivity gap between top and bottom performers can often be traced back to the performance of processes
� It is vital to adopt a ‘lean approach’ to minimise waste in operations:� move the value-
adding steps together� balance the work for
good flow� create scenarios to
deal with variations in demand
� create the capability for quick changeovers
� Standardising business functions through an SSF with a set of processes under a single organisational structure can � optimise the skills of
the staff� improve coordination� reduce fragmentation� strengthen
accountabilities� improve effectiveness� establish a platform
for future improvements
� The availability of consolidated business data on a global scale enables the standardisation and control of processes with standardised metrics/KPIs (Six Sigma, for example)
� Different models can be adopted such as� initial process
development in a lead factory
� dissemination and roll-out in secondary factories worldwide
OptimiseStandardise:
Shared Services Functions (SSF)
Globalise
Managing Growth in Advanced ManufacturingMay 2014
� Ricardo is a multi-industry consultancy for engineering and innovation with 2,300 staff worldwide
� Collinson Grant was asked to point out opportunities to raise performance and productivity� to make processes consistent
with good practice� to exploit SAP better� to reduce duplication and
inefficiency in management� to streamline the
organisational structure
� Using the Process Activity Analysis methodology, we reviewed the indirect work done by the staff in the UK. We also ran a series of workshops to map processes and find opportunities to cut complexity and waste
� Collinson Grant established a list of 19 process improvements which would save money. In addition to adetailed specification for the improvements, the team drew up a programme of change, including:� an estimate of the cost and
effort of implementation� a schedule for business
change� business controls through a
‘balanced scorecard’ system
� By analysing the contributors to each process, it was found that additional savings would be possible by� removing complexity from the
organisation� better defining responsibilities
and accountabilities� increasing efficiency in key
functions
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High-performance processes (2):Streamlining processes within a complex organisation
Managing Growth in Advanced ManufacturingMay 2014
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Enabler: Competitive cost structure (1)
Competitive cost structure
� Use insights from the product management and customer services functions to compete on total cost of ownership rather than purely product cost
� Optimise costs of portfolios of products by:� complexity reduction� modularisation and
platforms� standardisation of
technology
� Adopt target costing and design-to-value
� Revisit the trade-off between automation and labour costs, keeping in mind the need for flexibility
� Benchmark total production costs rather than labour costs, taking into account:� workers’ productivity� transit costs� time-to-market� logistical risks� energy costs
� Apply lean principles in all functions, not just manufacturing
� Increasingly, it is more important to manage the productivity of overheads than of direct labour
� Cost-effectiveness starts in the organisational design, with: � a flat simple structure� decentralisation� no confusion over
authority or responsibility
� Ensure that the true drivers of costs are known and controlled
� Ensure that 70-80% of effort goes into adding value to products and services
Optimiseproduct costs
Optimisedirect costs
Optimiseindirect costs
Managing Growth in Advanced ManufacturingMay 2014
� Caterpillar ACSD directly employs 6,663 FTEs (of whom 3,936 were in scope) and generates revenue of $4.2bn a year
� We interviewed managers and analysed managerial and financial data. As a result, we found many working functions in a complex organisational model:
� duplication of effort between business units, functions, and integrated project teams (IPTs)
� discrete spans of control
� a deep structure with too many layers
� too many interfaces
� We ran workshops for the senior team to work out ideas:
� to build on the concepts presented
� to challenge 'rules and norms'
� to specify initiatives for improvement
� ACSD quickly adopted a new organisation, resulting in:
� better direction and control, with fewer senior directors and V-Ps
� redefined R&D processes and organisation at lower costs: saving $50m
� faster, cheaper, and better cooperation with the customer
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Enabler: Competitive cost structure (2): Improving the effectiveness of indirect functions
Managing Growth in Advanced ManufacturingMay 2014
Three routes to positioning relevance of core offering
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Growth
R & D Supply chainProduction & order
fulfilmentSales & Marketing After-market
Globally integrated
organisation
Competitive cost structure
High-performance processes
Product management
Supply chain management
Customer services
33 St James’s Square London SW1Y 4JS United Kingdom Telephone +44 20 7661 9382 Facsimile +44 20 7661 9400
Ryecroft Aviary Road Worsley Manchester M28 2WF United Kingdom Telephone +44 161 703 5600 Facsimile +44 161 790 9177
Web www.collinsongrant.com www.collinsongranthr.com