Case Study: Urgent Need For Product Cost Reduction


The Problem

A major chemical manufacturing plant was facing an urgent need for product cost reduction in a 3-year period of time. The product pricing in the market was stagnant and could not be increased, so the company was in critical need of margin improvement.


The Solution

The company's objective was clear: 20% reduction in product manufacturing cost in three years. The site leadership strategically created the following teams to achieve this objective:

  • Process Yield Improvement Team: Implement process modifications to reduce raw material usage.

  • Production Volume Output Team: Increase production volume by increasing uptime and plant rate using tools such as OEE.

  • Fixed Cost Improvement Team: Utilized process mapping to re-organize a highly manual packaging process. This process yielded a reduction in operators through attrition.

  • Raw Material Purchasing Team: Reduced raw material pricing through strategic win-win negotiations with 3 major suppliers.


THE ROI

By the end of the 36 month period, product cost was reduced by 22%, saving a total of $15 Million per year. The cost of this project was $1 Million, but the savings far exceeded the cost.


If you are in need of Cost Reduction and Margin Improvement, RCI has a proven history of delivering results. Our consultants are available to do a half-day assessment of a particular process, and provide you within 36 hours a strategy for achieving your desired results. If you are interested in a free assessment, please reach out to Scott Packett at spackett@thinkrci.com.


13 views0 comments