Case Study

Oper­a­tional Excellence

A trac­tor man­u­fac­tur­er max­imis­es oppor­tu­ni­ties and grows profits

2022/06/13

Our client, one of the world’s lead­ing man­u­fac­tur­ers of trac­tors, enjoys a con­sid­er­able pres­ence in the export mar­ket.

Key results

4% to 45%

Increase in
First Pass Yield

3%

Improve­ment
in gross margin

24%

Reduc­tion Inven­to­ry Value

The chal­lenge

Despite enjoy­ing record sales from the pre­vi­ous year, the com­pa­ny was look­ing for oppor­tu­ni­ties for improve­ments. After an analy­sis of their man­u­fac­tur­ing process­es, we dis­cov­ered that: 
  • Over 90% of trac­tors built failed to pass the final pro­duc­tion test. 
  • 50% of fail­ures were a result of miss­ing materials.
  • A dis­pro­por­tion­ate lev­el of work in progress was required.
  • A high num­ber of trac­tors were not need­ed by the dealers.

What we did

Set up the Project Team to iden­ti­fy hid­den opportunities

Renoir con­sul­tants part­nered with the client’s task­force to focus on oppor­tu­ni­ty iden­ti­fi­ca­tion, sav­ings assess­ment, and tar­get attainment.
 

Set up Man­age­ment Action Teams (MATs) to realise these oppor­tu­ni­ties

The Man­age­ment Action Teams (MATs)—com­pris­ing the com­pa­ny’s man­agers and staffworked with the Project Team to exe­cute process­es and annu­alise the benefits.
 

Linked var­i­ous depart­ments to one man­age­ment con­trol system

Instead of work­ing in silos, the dif­fer­ent func­tions came togeth­er as one to man­age the entire busi­ness process. The result was bet­ter com­mu­ni­ca­tion, com­mit­ment and collaboration.

Reviewed Key Per­for­mance Indi­ca­tors (KPIs)

KPIs were revised dai­ly, week­ly and month­ly based on the per­for­mance reports, thus enabling the man­age­ment to tweak the vari­ances accord­ing to their goals.

Improved oper­a­tions  

First Pass Yield (FPY) dropped to 50% per week, thus opti­mis­ing the pro­duc­tion process­es and ensur­ing that work-in-progress (WIP) did exceed two full days’ worth of production.
 

Resolved dai­ly issues prompt­ly  

Rou­tine Inter­val Con­trols (RIC) were intro­duced through­out the cross func­tions of pro­duc­tion, qual­i­ty con­trol and ware­hous­ing. Such ini­tia­tives prompt­ly resolved issues and enabled exten­sive Root Cause Analy­sis (RCA) to be car­ried on per­sis­tent prob­lems and imme­di­ate­ly fixed them.
 

Improved stock avail­abil­i­ty  

Week­ly updates great­ly improved inven­to­ry ratio­nal­i­sa­tion and stock avail­abil­i­ty. There was 95% accu­ra­cy on sales fore­casts which helped in price and deliv­ery nego­ti­a­tions with key suppliers.
 

Improved new prod­uct devel­op­ment 

A project man­age­ment sys­tem was estab­lished to make the pro­duc­tion of new trac­tors more vis­i­ble. This ensured that change orders were imple­ment­ed, and the Bills of Mate­r­i­al were rou­tine­ly checked for accu­ra­cy. Close mon­i­tor­ing increased cus­tomer sat­is­fac­tion and boost­ed sales.
 

Min­imised “miss­ing parts” by improv­ing logis­tics and warehousing

The prob­lem of “miss­ing parts” delayed pro­duc­tion and caused a drop in FPY per­for­mance. We worked with the sales depart­ment to devel­op a sta­ble plan which increased the effec­tive­ness for logis­tics in nego­ti­ating for bet­ter terms with sup­pli­ers of spare parts. It also improved the accu­ra­cy and val­ue of the ware­house which result­ed in a sharp reduc­tion of “miss­ing parts” as a cause for a reduced FPY per­for­mance in production.
 

Bet­ter sales

Sales improved because of fre­quent sales fore­casts and bet­ter com­mu­ni­ca­tion among sales, plan­ning, logis­tics and region­al distributors.
 

Improved after sales

We intro­duced an effec­tive report­ing sys­tem to iden­ti­fy the fre­quen­cy and caus­es of cus­tomers’ com­plaints on trac­tors bought. The com­plaints were then han­dled pro­fes­sion­al­ly and in a time­ly man­ner. With clos­er liai­son with pro­duc­tion, qual­i­ty and new plan­ning devel­op­ment (NPD), the number of war­ran­ty claims were reduced.

 

Results

At the end of the trans­for­ma­tion project, the com­pa­ny received exact­ly what they need­ed vis­i­bil­i­ty of hid­den oppor­tu­ni­ties. The employ­ees, too, received a ben­e­fit: knowl­edge trans­fer. They now have the know-how to dri­ve future improve­ments.   Here is a sum­ma­ry of what we helped the client achieve: 
  • Increased First Pass Yield aver­age from 4% to 45%.  
  • Increased gross mar­gins by 3%.  
  • Reduced inven­to­ry val­ue by 24%.  
  • Intro­duced company-wide man­age­ment con­trol sys­tem.  
  • Estab­lished NPD plan­ning and report­ing tool.
* We take client con­fi­den­tial­i­ty seri­ous­ly. While we have kept the brand anony­mous, the results are real.
 

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