Cases

Strategic Cost Reduction for a Plastic Fittings and other Injections Manufacturing Company

Challenge

The client was manufacturer of luggage fasteners, with units in Daman and Goregaon. Its customers included a host of luggage manufacturers. Sales growth and profit margin declined for over two years in a row. The key issues with the organisation included:

  • Lack of a clearly defined vision and values
  • Lack of a clearly defined business strategy
  • Poorly defined planning systems
  • Poor communication between employees and management
  • Lack of clearly defined organisation structure, reporting relationships, roles and responsibilities
  • Mismatch between required and actual profiles of employees
  • Lack of clearly defined evaluation and reward systems
  • Heavy involvement of top management in routine operations due to centralised decision-making and a lack of delegation
  • Inadequacy of software and hardware to support transaction processing, data analysis and decision-making across the organisation

The top management requested UC to define a strategy for reducing costs.

Our Approach

UC made a cost reduction strategy for the client, taking the following steps:

  • Defined, documented and communicated to employees, vision and values
  • Formulated a business strategy and recommended to

    1) Focus on product innovation and mould development

    2) Market its products in applications other than luggage

    3) Globalise its activities

  • Developed the following systems/models

    1) Pricing model to enable top management to price its products appropriately

    2) Linear programming model to arrive at appropriate product mix and capacity loading

    3) MS-Project based planning systems at the mould manufacturing factory

    4) Planning systems at thr fittings manufacturing factory

    5) Cash management model to enable top management to plan and monitor cash flows

  • Human resource related activities

    1) Restructure the organisation

    2) Defined a human resources policy

    3) Defined training needs of all employees, recommended appropriate training methods and initiated building library of management literature

    4) Initiated periodic meetings between employees in various functions

  • Prepared an information technology blueprint and recommended software, hardware and communications solutions.

Impact

As a result of various initiatives, customer complaints reduced by 70 per cent. There was a sales growth of 37 per cent against 26 per cent of the previous year. There was a growth of profit before tax (PBT) by 24 per cent against 10 per cent the previous year.