Reducing New Product Development & Commercialization Cycle Time
A multi-million dollar producer of plastic raw materials with several manufacturing sites in NAFTA (North American Free Trade Agreement) was consistently missing target dates to introduce new products to market. They were exceeding their new product development budget for each project in their portfolio. Further, the core business was eroding due to their competitors undercutting market pricing.
We conducted an audit of their project management, new product development and commercialization processes. We uncovered that each manufacturing site had their own project management process as it related to developing and introducing new products to market. The audit also uncovered that the process to fund new product development varied between manufacturing sites. Each site lacked a strong process to track project progress from launch to successful completion.
The information obtained from the audit was used to create a standard project management process. This is related to a new product development commercialization process for all NAFTA manufacturing sites resulting in:
Standardized Stage Gate Process to track projects from initiation to closure
25% reduction in cycle time to market for new products from all manufacturing sites
15% reduction on new product development costs
$35 Million in sales from new products
Improving Manufacturing Productivity and Product Quality
A flexible plastics packaging company was experiencing a first pass quality rating of 67% due to aged manufacturing equipment that lacked proper maintenance. They were also experiencing excessively high scrap rates. The issue was further worsened by the 4.2 day average manufacturing equipment up-time versus 7.0 days due to poor machine maintenance.
Multiple projects had been undertaken to correct these issues. Unfortunately, none of them resulted in achieving the goals of a 90% first pass quality rating, and machine up-time of 6.0 days. An audit of the failed maintenance projects pointed to the root causes. We discovered a lack of manufacturing leadership, poor project planning, and inability to execute projects as planned.
We replaced the plant manager with the previously retired plant manager who had a strong track record of achieving manufacturing rates without sacrificing product quality. We provided coaching to the maintenance manager to design and implement daily, weekly and monthly quality audits. We also had maintenance schedules for equipment based on equipment complexity and daily usage rates produced.
Weekly maintenance reviews were implemented with the manufacturing and maintenance teams to keep focus on critical maintenance projects. We married the performance compensation of the maintenance manager to the plant manager to promote joint collaboration for improved manufacturing productivity.
The results of actions yielded are as follows:
A 90% first pass quality rate
6.3 day machine up-time rate within three months of implementing changes
An additional $1.2 million of product was produced per year and available for sale
Opportunities were identified for manufacturing automation that once implemented increased first pass quality to 98% and,
Machine up-time to 7.0 days per week
Increasing Product Contribution Margin and Profitability
We inherited a project to increase the contribution margin and profitability for a medical products company that was experiencing declining profitability. Prices for core products had not been increased in five years and the cost of goods sold had increased over that timeframe. Additionally, the company had signed long-term sales agreements with its top two clients worth $15 million by agreeing to fixed prices, with no regard to rising raw material costs.
We increased product pricing for all products to reflect market conditions due to rising raw material costs. For clients not under a sales agreement, we implemented quarterly sales agreements with pricing tied to the actual cost of raw materials.
Pricing to company distributors was also increased to reflect market conditions. All deviations from distributor pricing allowed by the previous leadership team was abolished.
We also renegotiated long-term sales agreements with the top two clients increasing unit pricing to market rates, and incorporated semi-annual price adjustments tied to a third party index.
The results of the above actions are summarized as follows: