Factory Consolidation Capex Plan

Challenge

A leading Australian frozen meals business was looking to strengthen their competitive position through optimising their manufacturing network.

Key challenges included:

• Multiple manufacturing sites with medium to low asset utilisation
• Stable volumes with slow organic growth and sales strongly competing on price
• Aged technology, high labour intensity

The business engaged a team led by Evert Westerhof (note this was prior to Evert joining Cinc) to develop a strategic plan for a manufacturing footprint with a highly productive cost and asset base. Investments for each transformation steps needed evaluation against attractiveness of payback.

Approach

The team built a manufacturing network model, evaluating existing assets, factory overheads, operating cost and supply chain costs covering multiple scenarios, combining similar products in the same location. In parallel, they developed a high-level capex estimate for each scenario and were able to overlay implementation investments per scenario to assess attractiveness.

Key elements were:

1. Opportunity evaluation

Cost and value drivers modelled:

• Factory and line throughput, productivity and automation for each location, but also for new assets
• Overhead reduction through running fewer facilities and benefitting from scale at larger sites
• Operating philosophy of the new network, down to line level. SKU allocation per line, balancing speed and scale with complexity and changeover requirements
• OEE performance: addressing low performing equipment and current bottlenecks through new technology as well as accounting for planned losses (cleaning and changeovers) to evaluate realistic line performance
• Other scale benefits including central overheads, procurement and R&D benefits

2. Consolidated site masterplan – factory design

• Designed consolidation site scope leveraging existing assets and quantifying investments
• Evaluated phased execution for a multi-stage consolidation plan, each with an attractive payback
• Designed for future expansion beyond current plans

3. Capex scope development & roll-out plan

• Capex scope was developed, including value engineering scope to manage risks and variations in execution

4. Outcome – phase 1 kick off

• The client decided to kick off the detailed scoping work and capex request to the board, with the first phase delivering a $25M annual cost benefit for their business.

Team members involved: Evert Westerhof

This engagement was delivered prior to the team member joining Cinc. The experience and results described reflects work led by the team member(s) identified above, noting they were supported by a non-Cinc delivery team and the credential should be viewed in that context.

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