Overview:

• The new technology reduced labour costs by 43%, which meant they could afford to offer their products at a significantly lower price.

Challenge:

A North American electronics manufacturer came to Challenge Advisory wishing to boost their profit margins. Their previous years were successful, but last year they suffered a revenue loss of 35%. Eager to learn from their mistakes, they approached Challenge Advisory to ensure there was no repeat.

The Revelation:

Challenge Advisory started to research the client in order to resolve their issue. The research team came together to conclude that while the client’s revenue had a track record of being consistently strong over a ten- year period, profits were lower than they should have been.

It was found that these lower than expected costs were due to unusually high operating costs, and further investigation and collaboration with the client confirmed that labour costs were particularly to blame. Although the company was based in North America, the components of their electronic products were manufactured abroad.

The company also produced bespoke products, which required a separate order and could be subject to several amendments before a successful product could be made.

Challenge Advisory consulted with its strategy team, organisation and manufacturing teams in order to conjure a solution to the high operating costs. The teams consulted with the client and together, they devised a solution that would secure lower labour costs.

This was to be achieved by optimising the client’s supply chain and introducing new technologies into their business model and manufacturing process. It was decided that customer demand for bespoke products was too high for outsourcing to be economically feasible. Challenge Advisory introduced the client to new automation and Digital-To- Physical Transfer (3D printing) technology, that would allow for some of their components to be manufactured at their own factory and meant that for bespoke products, the time to market and the costs were significantly lowered.

Challenge Advisory also helped the client to improve their Product Lifecycle Management with new software designed to integrate all aspects of their business for leaner operations. The new technology also helped them to improve their labour costs overall, as more work could be done in their own offices, and the need for outsourcing became substantially lower.

Outcomes:

This proved to be a substantial success for the client. The new technology reduced labour costs by 43%, which meant they could afford to offer their products at a significantly lower price. This boosted their revenue by 20%, but more importantly, it improved profit margins by as much as 50%. The client plans to use this extra capital to invest in more sustainable raw materials, with the hope of making their business more profitable in the long term.