More than a million manufacturing jobs in the UK have been lost in the past five years as a result of offshoring. But sourcing production overseas is not a cure for every domestic problem, as fastener-maker Infast discovered in 2004.
With Infast losing money on its UK fastener operations (producing screws, bolts and fixings) at a rate of £16m a year, CEO Robert Sternick and his board decided to pull the shutters down and supply the company's customers - manufacturers in the automotive, rail and industrial sectors - via low-cost suppliers in the Far East.
Closing plants around the UK would mean laying off more than 200 workers, so Infast appointed Rossmore to plan and execute a strategy for exiting manufacturing in the UK and sourcing products from overseas - in just 12 months.
Rossmore soon realised that sourcing comparable quality at competitive prices would be very tricky. The company's customers were also jittery about the proposed changes - they routinely demanded products with as little as three weeks' notice and were reluctant to support the necessary trials of the new products. Meanwhile, the announcement of the UK closures brought relations with workers to an all-time low.
The consultants began to see that a UK manufacturing operation could still offer clear benefits to Infast, but an alternative strategy to closure was needed before a meltdown occurred. High-volume standard products could be re-sourced to low-cost suppliers, but the UK operation could be transformed into an agile, high-quality supplier of high-value, low-volume products.
The Infast board adopted the Rossmore strategy. Rossmore worked to a five-stage evaluation process to create a balanced outsourcing programme and re-structure the UK manufacturing operations.
Infast realised an annual saving of more than £600,000 on the volume products outsourced. Meanwhile, the monthly losses on the retained higher-value UK manufacturing business, which peaked at around £250,000 a month in '04, were converted to operational profits within six months. The business was sold as a going concern, saving 200 manufacturing jobs.
Urgent cost/benefit analysis allowed Rossmore to turn monthly losses of £250,000 at its Infast factory to profits within a half-year.
- Keep momentum going through openness and honesty.
- Consult widely among stakeholders to take a balanced view of impacts and risks.
- Think the unthinkable.
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