The client, a leading manufacturer of glass packaging for pharmaceutical and cosmetic products has experienced growth both, organically and inorganically with a compound annual growth rate (CAGR) of over 35 percent. However, the client was looking at opportunities to optimise costs across the supply chain and approached UC Strategy to assist in bringing improvement in the operations. In addition, the top management also requested UC Strategy to test the existing philosophy of customer profitability. Thus, customer management was also included in the scope of the engagement.
UC Strategy visited the manufacturing plant to understand and assess the operations, interacted with key personnel at the plant and the head office and conducted a macro analysis to decide the following areas for cost reduction:
- Materials (raw material, packing material, engineering spares and moulds and accessories)
- Logistics (inbound and outbound)
- Energy (power and fuel)
To further identify the opportunities in the above areas, UC Strategy adopted the following approach:
- Opportunities in Materials
- Batch mix optimisation – usage of alternate material to reduce batch cost
- Revision in packing material specification
- Reduction in packing material consumption
- Opportunities in Energy Management
- Controlling compressed air system leakages
- Option for waste heat recovery
- Running equipment on variable load instead of constant load
- Opportunities in Logistics
- Transporting mixed loads to improve truck load ability
- Optimisation of vehicle/ mode for products
- Use of 40’ high-cube containers for exports
- Pallet load optimisation by changing pack configuration
- Opportunities in Customer Management
- Revisited the current metric for customer profitability and revised it by adding the element of production bottleneck
- Defined the pocket-margin framework for customer profitability
- Defined the tracking mechanism and benefit run-rate sheets to monitor progress.
The client received an action plan of the opportunities to optimise cost. The cost reduction of Rs. 9 crores annually were analysed in the engagement. It was also decided that the UC Strategy team would be a part of the monthly review meetings to track the progress on various initiatives.