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Product Line Value Improvement Doubles EBITDA
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Equipment manufacturer
SKU Proliferation
and Declining |
Supplying equipment to large retailers is a competitive business. Under price pressure, one manufacturer had executed some common cost reduction initiatives: China sourcing, Lean manufacturing, and staff downsizing. Yet, they needed to do more. The ProAction Group found that SKU proliferation and design choices were draining profits. In an effort to woo customers, the company was adding bells and whistles to their product without an understanding of what customers valued, or an appreciation for the added complexity. Sales, product design, and manufacturing were not aligned to maximize business profits.
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Competitive Product Review
Design for Value Process
Methodology Transfer |
The ProAction Group's first initiative was to conduct a competitive product review. We deconstructed a competitor's product, assessing it for manufacturing and assembly processes, cost structure, component sourcing, and functional advantages. We then reviewed best-in-class practices in each of these areas.
ProAction facilitated a structured Design for Value process. Representatives from each functional group participated in mapping the manufacturing process and cost elements of each component from one of the company's key products. The group conducted extensive brainstorming, quantifying all value improvement opportunities. Based on this assessment, the team prioritized key initiatives, then began implementation.
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$3.0 M Increase in EBITDA
Potential Improvement
in Cash Flow |
The competitive product analysis generated 87 improvement ideas: 9 had potentially favorable cash impacts, 14 applied to the new product pipeline.
ProAction's collaborative team process enabled sales, engineering, and manufacturing to work together. In total, the team identified 80 ideas which they developed into 17 documented design concepts. These designs will be converted into prototypes for domestic and off-shore manufacturing. The EBITDA improvement from these efforts is tracking to $3 million, doubling the company's earnings.
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