Improving Productivity by 31% in a High-Tech Defense Environment (CS191)
Cross-functional alignment and leadership agreement around change improved competitiveness while maintaining quality, compliance and 100% on-time delivery
This story is for manufacturers of military assets and military command structures that:
- Are looking to optimize their procurement and operations functions
- Want to improve performance and enhance cross-functional alignment in a highly-regulated, demand critical and high-tech environment
- Want to extract more value from the supplier environment regarding their product portfolio to the benefit of the prime contractor and DOD
This specialist component manufacturer is a leader in advanced battery technology. The company is a subcontractor to DOD prime contractors, focused on providing advanced batteries, battery management systems, and energetic devices. 85% of the batteries produced go to the defense sector.
Although the company was already profitable with >20% margins, its new owners needed to achieve threefold
growth over the next five years. To achieve this goal, they needed to dramatically lower costs in operations and
procurement while maintaining high quality and accelerating delivery standards. This would allow them to be competitive and more innovative in existing and new commercial markets.
Maine Pointe was initially engaged to infuse best practice and operational excellence across the entire
organization and develop the management team to enable them to take control of their business and drive performance improvements. This resulted in a 31% productivity improvement and a nine point (45%) increase in EBITDA. We were then invited to help the company take the next step on its supply chain transformation journey toward Total Value Optimization™, ensuring that they have the right supply base and partners in place.
Achieving cross-functional alignment and cultural changeOur analysis of the company’s operations uncovered a ‘cost plus’ and change resistant culture. In addition, the procurement function was very immature. Our SMEs helped them better define the applications and requirements of a highly engineered, high-end technology environment. The analysis determined that the workforce could be reduced by >30% while delivering the same or improved quality and on time delivery. The challenge was to achieve increased productivity and cultural change in an atmosphere with multiple layers of control and security to ensure that Prime Contractor and DOD mandated processes were not changed in any way.
Maine Pointe utilized its past experience conducting procurement in a defense environment and dealing with complex ITAR compliance and NOFORN regulations, to streamline the company’s production processes rather than the manufacturing steps of the product. Our operations excellence, strategic procurement and Leader and Organization Improvement (LOI) professionals worked hand-in-hand with our client. Together we developed and delivered the tools and training required to integrate procurement and operations processes within a dynamic culture
- Encouraged company executives to proactively approach prime contractors and DOD agencies to inform them of how the improved production processes would ensure fidelity to the design and manufacture of their products
- Engaged all employees from management, to supervisor, to the shop floor. This built the bottom-up and top-down trust and confidence that would enable them to work as a team
- Created a Manufacturing Master Schedule that detailed the resources required to meet production
- Sized the workforce in each area appropriate to the new Master Schedule
- Conducted both formal training and on-the-floor coaching with each supervisor and manager in using the tools of the new Manufacturing Management Operating System (MOS).
- Applied rigorous procurement methodology to leverage spend across multiple product categories, driving double-digit cost reductions on direct materials
- Transformed from tactical purchasing to a strategic sourcing organization
- Implemented a competitive bidding environment with the addition of new suppliers
With an engaged and enthusiastic workforce and significantly reduced cost base, our client is now empowered to make better choices. This gives them the ability to rapidly respond to changing market requirements, penetrate new markets and grow their business while maintaining the highest levels of security and DOD compliance.
The ResultsMaine Pointe's experienced team helped out client to:
- Reduce its workforce by >30% and transform the culture to an engaged dynamic workforce
- Achieve a 31% productivity improvement overall
- Improve direct labor productivity by 25-53% at each client site
- Improve visibility to costs, profits and variances to plan
- Implement best-in-class strategic procurement processes
- Decrease supply risk
- Improve EBITDA by 10% for a company that was already achieving 20% margins
- Achieve a ROI of 6.4:1
Lessons learned for other executives
- It is possible to improve operations and procurement fast in a highly regulated and secure
- Incumbent suppliers are not necessarily the best and can lead to suboptimal results for the prime and DOD
- With proper leadership, drive and goals, you can re-energize management and workforce in an environment where changes is viewed positively
- Accelerated change can revitalize the workforce and encourage active innovation to the benefit of prime