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Network Configuration And Operations Transition At Global Industrial Manufacturer: Moving Production from the Southern U.S. to Mexico THE CHALLENGE: The client, the global market leader in the heating and controls market, was spun out of a larger company and purchased by a large private equity firm. To secure their standalone status, the new owners and the newly independent management team planned to purchase a manufacturing facility owned by the parent company that produced a significant amount of the client’s product. Moreover, given that the company had already busted bank covenants and was far off growth projections, an aggressive roadmap for moving forward and capturing EBITDA improvements was sorely needed. THE PARTNERSHIP: Analysis: Our diagnostic revealed that the Southern U.S. facility had been systematically ramped-down by the original owner over the past 18 months, and that the facility’s go-forward abilities had been highly compromised. Moreover, our analysis of the overall North American production and delivery system highlighted a cumbersome, 8-plant manufacturing network characterized by legacy facilities and unnecessary complexity. Strategy: VertiSync provided the client with a "Center of Excellence" network model that would simplify operations and unlock opportunities. The strategy called for rapidly (within 12-18 months) migrating North American operations from a dispersed set of standalone facilities with significant functional overlap into a leverageable, focused, world-class network with one U.S. facility specializing in skills-based, engineering intensive products, and one Mexican facility specializing in high volume, labor intensive, commercial products. This strategy would create a value of $8-12 million annually, at a one-time cost of $2-3 million. The first step was to transition operations from the Southern U.S. facility to a Greenfield facility in Mexico. Execution: Our joint, cross-functional team managed the culturally challenging ramp-down of the Southern U.S. facility and the equally difficult ramp-up of complex manufacturing operations within the Mexican Greenfield location. Our team conducted an intensive audit to ensure that the critical equipment, data, and knowledge would be identified, protected, and transferred from the U.S. to Mexico. We designed and implemented the entire ramp down, transition, and ramp-up work plan, including managing the staffing and training of the Mexican workforce, and the staging of production by critical customers. In addition, the team backfilled significant skill gaps within the client organization that became apparent only after transition had begun. THE RESULTS: Within 6 months, all manufacturing was transferred out of the U.S. and into Mexico. A robust, low-cost manufacturing facility was established in the Mexican Greenfield, the volume of which already exceeds all other plants within the North American manufacturing network. |
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