Case Study

Oper­a­tional Excellence

A coat­ings man­u­fac­tur­er boosts its com­pet­i­tive­ness with a new way of working

2021/12/20

 

Key results

3.1:1

Return in project investment

20%

Reduc­tion in pro­duc­tion cost/kg

>50%

Reduc­tion in fin­ished goods inven­try turnover days

About the client 

Our client’s busi­ness is focused on the pro­duc­tion and sales of petro­chem­i­cal prod­ucts includ­ing sol­vents, coat­ings, inks, and lubri­cants. The com­pa­ny is a major glob­al pro­duc­er of acetate sol­vents and one of China’s major man­u­fac­tur­ers of ink. 

The chal­lenge

To cope with an increas­ing­ly chal­leng­ing busi­ness envi­ron­ment, the com­pa­ny had been in a con­tin­u­ous dri­ve to pur­sue oper­a­tional excel­lence, cost struc­ture opti­mi­sa­tion and man­age­ment effec­tive­ness.  After con­duct­ing a com­pre­hen­sive busi­ness analy­sis, we uncov­ered sev­er­al oppor­tu­ni­ties to improve the company’s pro­duc­tiv­i­ty and effi­cien­cy. Fol­low­ing this, we imple­ment­ed a 30-week project aimed to achieve five key objectives: 

  • Improve the pro­duc­tion qual­i­ty of a key plant and reduce raw mate­ri­als wastage by enhanc­ing its man­age­ment con­trol sys­tems (MCS).
  • Opti­mise the sales and oper­a­tional pro­ce­dures to bal­ance demand and sup­ply, reduce inven­to­ry lev­els, re-evaluate the cur­rent prod­uct mix and improve the over­all sup­ply chain.
  • Improve pur­chas­ing strat­e­gy, rais­ing the effi­cien­cy and effec­tive­ness of nego­ti­at­ing tech­niques and reduc­ing the cost of raw mate­ri­als by joint ini­tia­tive pur­chas­ing and bet­ter research and development.
  • Improve the logis­tics man­age­ment con­trol sys­tem to increase effi­cien­cy, reduce cas­es of goods dam­aged dur­ing trans­porta­tion, and low­er over­all costs.
  • Change man­age­ment behav­iours from fire­fight­ing to fact-based, active prob­lem solving.

What we did

The project was split into five work­streams, with one work­stream focused specif­i­cal­ly on the pro­duc­tion plant. After 30 weeks, this is what was achieved: 

Work­stream 1: Pro­duc­tion plant 

  • A new MCS that improved the over­all plan­ning process, giv­ing plan­ners more con­trol over mate­ri­als and yield. This includ­ed a new KPI dash­board that high­light­ed vari­ances such as cost, qual­i­ty, and efficiency. 
  • A proac­tive qual­i­ty con­trol sys­tem cov­er­ing Fail­ure Mode Effec­tive­ness Analy­ses (FMEA), prod­uct first-pass yield assess­ments and root cause analyses. 
  • Improved for­mu­la accu­ra­cy through pri­or test­ing, and estab­lished pack­ag­ing and inspec­tion con­trol procedures. 

Work­stream 2: Sales and oper­a­tions plan­ning (S&OP) 

  • A new strate­gic stock­ing mod­el that tracked and opti­mised prod­uct inven­to­ry levels. 
  • Con­trol mech­a­nisms that increased the response time of plan­ners while reduc­ing peak lev­els of inventories. 
  • Opti­mised S&OP process­es to improve the accu­ra­cy of sales fore­cast­ing to bal­ance sup­ply and demand. 
  • Reduced the num­ber of stock-keeping units (SKUs) to stream­line the over­all prod­uct mix. 

Work­stream 3: Pro­cure­ment 

  • An opti­mised pro­cure­ment MCS that was more sys­tem­at­ic and reduced instances of dor­mant stock. This also includ­ed a new method­ol­o­gy for pur­chas­ing raw materials. 
  • A new nego­ti­at­ing track­ing mech­a­nism that encour­aged proac­tive nego­ti­at­ing behav­iour. Stake­hold­ers could active­ly mon­i­tor the price trends of the raw mate­ri­als mar­ket to min­imise feed­stock cost. 
  • A cost reduc­tion pro­gramme involv­ing pro­cure­ment and research and devel­op­ment, that achieved sub­sti­tu­tion of raw mate­ri­als and val­ue engi­neered formulas. 
  • A new sup­pli­er per­for­mance eval­u­a­tion sys­tem to improve the qual­i­ty of raw mate­ri­als supply. 

Work­stream 4: Logis­tics 

  • An opti­mised stor­age and trans­porta­tion MCS which includ­ed batch and first-in-first-out principles. 
  • Improved stor­age effi­cien­cy that reduced costs by elim­i­nat­ing waste through var­i­ous quick-win ini­tia­tives, reduced ware­house space and met the audit require­ments of customers. 
  • A refined pro­duc­tion mod­el to reduce long-distance trans­port and improve logis­tics efficiency. 
  • Intro­duced third-party logis­tics (3PL) and car­ri­er evaluation. 
  • Improv­ing the over­all trans­porta­tion bid­ding procedure. 

Work­stream 5: Archi­tec­tur­al sales

  • A new sales effec­tive­ness MCS that cov­ered dai­ly reports, dis­trib­u­tor inven­to­ry check­ing and the col­lec­tion of local mar­ket intelligence. 
  • Shift­ing sales to focus on end cus­tomers via dis­tri­b­u­tion channels. 
  • New strat­e­gy tools to iden­ti­fy new sales oppor­tu­ni­ties, bet­ter under­stand­ing of demands, and devel­op­ment of plans for expand­ing dis­tri­b­u­tion channels. 

Results

In addi­tion to the afore men­tioned ben­e­fits, the client was also able to: 

  • Reduce its ware­house space require­ments by 50% 
  • Reduce its raw mate­ri­als con­sump­tion loss by 38% 

The sales effec­tive­ness MCS that was intro­duced in the archi­tec­tur­al sales work­stream) was also used in a pilot project. As a result, sales rev­enues increased sharply dur­ing the project peri­od. There was also a dra­mat­ic increase in chan­nel pen­e­tra­tion, thanks to the open­ing of new sub-distribution stores. 

The company’s new, robust man­age­ment con­trol sys­tems and cul­ture of con­tin­u­ous improve­ment helped posi­tion the com­pa­ny to weath­er the chal­lenges of an extreme­ly com­pet­i­tive market. 

What the client said 

“This project with Renoir has helped improve our abil­i­ty in man­age­ment and exe­cu­tion. This is an impor­tant step in strength­en­ing the mus­cle of the enter­prise and seek­ing changes amid sta­ble progress to achieve our vision.” 

— Client CEO 

* We take client con­fi­den­tial­i­ty seri­ous­ly. While we have kept the brand anony­mous, the results are real.

 

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