Originally Published MX January/February 2004
BUSINESS PLANNING & TECHNOLOGY DEVELOPMENT
The Five-Levers Framework Applied|
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A medical diagnostics manufacturing company acquired a smaller diagnostics manufacturer in order to gain access to several key technologies developed by that company. To integrate the two enterprises successfully would involve combining the supply chains and manufacturing operations of both, and rethinking overall operations strategy. A consulting firm helped the acquiring company to make adjustments in all five of the operational levers discussed in the article so as to realign its supply-chain strategy with its new order of operations.
Supply-Chain Configuration. The new, larger company reviewed all manufacturing operations and key technologies, identifying and eliminating a number of duplicate sourcing and manufacturing operations. These changes resulted in an 11% reduction in total manufacturing costs for the combined entity.
Management Practices. The combination company introduced a postponement strategy for its key products, delaying their final assembly until orders were received. This just-in-time practice enabled it to consolidate finished-goods inventories. Nineteen product-storage sites were able to be reduced to six. The streamlining significantly lowered costs related to inventory holding and product obsolescence.
Strategic Relationships. After identifying which of its competencies were core elements of its business, the company developed strategic partnerships that enabled it to outsource noncore operations and products.
Organization. The company centralized organizational responsibilities for its supply chain so that the changes just enumerated could be implemented rapidly.
Information Technology. The company implemented a new IT applications architecture that more effectively linked its global planning and customer order fulfillment systems. This allowed the company to reduce its dependence on forecasts and move toward a make-to-order strategy, resulting in improved order-filling rates, smaller inventories, and less obsolescence.
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