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 us 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

We 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, we 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
• Overheads 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 and rollout 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.

Impact

$25M

Annual cost benefits

2.5 years payback

Discounted payback on Capital and Operational expenditure

+50% asset utilisation

Due to consolidation of fewer assets with higher throughput and utilisation, resulting in better productivity

$20M

Further savings in future investments at <3-5 year payback, with volume growth trigger points for investment