CASE NO. 67
Operational restructuring in the machinery and plant engineering industry
INITIAL SITUATION
A globally active machinery and plant engineering company, at its best with about 70 million Euro turnover, had been producing losses into the millions for years. The owners were unwilling to compensate the losses any longer and demanded the operational restructuring of the company.
CHALLENGE
The company used to be very successful in selling entire factories worldwide. Its industry equipment was "Made in Germany", maintenance and repairs were rarely needed. As a consequence, a moneymaking service business did not develop. Meanwhile the demand for new factories had diminished. And former customers turned to Asia for the procurement of spare parts. A reversal of this trend was not in sight.
SOLUTION
The capacities and the cost structure of the company were adjusted to the reduced demand. The organisation was realigned, away from the project capability for entire factories, towards delivering smaller plants, machinery and components. Purchasing was internationalised to reduce material costs. A maintenance and spare parts business was established to stabilise the revenues. The sales department determined investment and spare part needs worldwide to be able to target new customers specifically.
RESULT
The operations were downsized in several stages over two years. Head count reduction was 29 % , production material was purchased at 11 % less cost on average, and other expenses were reduced by 34 % . With these effects combined the company was break even.
