Reducing the Cost and Improving Profitability for a Company that Manufactures Alkyl Phenols and Technical Grade Agrochemicals
The client was into manufacturing of alkyl phenols and thereafter diversified into manufacturing wide range of agrochemicals like quinalphos and chloropyriphos-technical grade. The company has its manufacturing base near Gujarat. Barely managing to breakeven at the profit before depreciation, interest, and taxes level, the top management requested UC to assist in identifying opportunities to improve profitability by identifying cost reduction initiatives.
To reduce costs and improve profitability for the client, UC adopted the following approach:
- Identifying opportunities for improving profitability on 3 fronts:
1) Improving throughput
2) Optimising inventory
3) Reducing operating expenses
- Process flow mapping (time and quantity) was done for all plants to identify bottleneck work centers. Nonproductive capacity of all bottleneck work centers were analysed and opportunity to increase throughput were established considering market conditions
- Inventory analysis was done for raw material, packing material and stores and spares items and savings potential was determined.
- UC analysed individual controllable expense heads and identified the following opportunities:
1) Reduction in rent, rates and taxes by co-location of office staff
2) Reduction in inbound and outbound transportation cost by getting better prices from transporters
3) Reduction in communications cost.
The client received an assessment of top line growth resulting from throughput improvement and saving through cost reduction initiatives.