Creating the right global manufacturing footprint

A critical look at the plant structure of globally operating companies reveals that both the location of factories and the respective product spectrum normally constitute a complex structure that has taken root over many years.

Numerous instances of production outsourcing, which were often undertaken with a one-sided look at wage advantages, have led to a situation where supply chains and supply relationships between plants are now difficult to control and, moreover, have become expensive. Plant locations obtained through acquisition are often inadequately integrated, and technology and equipment standards that are uniform worldwide have seen only rudimentary implementation. From the procurement side, the implementation of global sourcing strategies often means that the sourcing of parts and components is shifted by thousands of kilometers.

Parallel to this, sales markets and growth potentials in numerous industries have shifted to China or India, which in turn generates increasing pressure to localize further in these regions. On the other hand, traditional markets, such as Europe or the US, which is where the bulk of added value is very often located, offer only limited options for growth scenarios.

These basic conditions make it necessary to rethink current production and location strategies and to develop a new approach to the global manufacturing footprint.

ROI Consulting offers a graduated approach for this:

An important first step is the creation of transparency in the existing production network: With regard to location, strengths and weaknesses are highlighted in a structured manner, and existing potentials are localized and then depicted under a benchmarking comparison spanning all locations. Global value streams and supply chains are critically analyzed and made transparent through a rigorous evaluation of process costs.

Based on the results of the location evaluations, as well as taking into account the defined product strategy, the next step consists of subjecting core processes and technologies, as well as the existing vertical range of manufacture, to a core-competency evaluation. This stipulates the solution space for structuring future ‘make volumes’ and defines the substantive framework for ‘buy strategies’.

Using the sales scenarios for the various regions, and strictly applying the “total cost to serve” approach, the third step addresses global plant-network and location planning. This consists of defining the manufacturing volumes and technologies per location, the fundamental principles for laying out the production systems aligned to the respective location factors, and a transformation plan for step-by-step implementation.

Moreover, the development of broad-based capacity and supply-chain planning is essential for directing globally deployed value-added chains.

You can find an overview of our entire spectrum of services in this area under Lean Production.