A medium-sized Swiss manufacturer of highly specialized large vehicles was sold by the founding family to an industrial holding company. Despite various efforts by the private equity holding company, the company did not meet the profitability expectations of the new owner. The board of directors aimed to achieve the profit targets through a comprehensive cost reduction program and appointed the interim manager as Operational Excellence Manager. However, it quickly became apparent that the previous business model did not have long-term prospects and that a realignment was therefore unavoidable.
Costs quickly and effectively reduced through renegotiations and order bundling
In accordance with the original assignment, the interim manager first identified approaches for a cost reduction program. It turned out, for example, that the company had outsourced a lot of expertise to suppliers. In addition, the largest supplier was a direct competitor from abroad. Despite this initial situation, the interim manager succeeded in sustainably reducing the purchasing costs for the products under consideration by ten percent by renegotiating and bundling orders.
Client convinced of business model realignment
At the same time, it became clear that the holding company's profitability target (EBIT of seven percent) could not be achieved through a pure cost-cutting strategy. Based on these results, the interim manager suggested to the client that the business model should be realigned. He convinced the board of directors to restructure the loss-making production of special vehicles.
The company's market is characterized by the target group's high purchasing power and ability to pay. At the same time, potential customers have very detailed requirements for the special vehicles, which are difficult to implement with standardized vehicle production. To get out of this dilemma, the interim manager and the team developed the concept of "mass customization", which allows every customer request to be fulfilled down to the last detail and significantly reduces production costs. The core of the reorientation was a comprehensive digitalization of the planning and production processes, which focused primarily on a flexible production structure and the use of 3D planning. This realignment made it possible to end the business relationship with the previous main supplier and competitor and achieve greater independence. At the same time, the new strategy secured the company more earnings opportunities along the value chain.
Business plan developed for multi-million investment in digitalization of production
The implementation of this strategy required a seven-figure investment. Following a comprehensive market analysis, the interim manager developed a detailed business plan that clearly demonstrated the feasibility and financial benefits of the new approach and led to approval by the Board of Directors.
In order to achieve a sustainable EBIT margin of seven percent, EBIT improvements of almost one million Swiss francs had to be realized. In order to achieve this goal as quickly as possible, the interim manager identified the areas in which particular action was required. It turned out, for example, that the design department would not be able to achieve the objectives of the new strategy for another ten years with its current equipment. In order to speed up the process, the company followed the interim manager's recommendation to add two full-time employees to the design department.
Management expects growth well above the targets set
The new business model has put the company on the right track. The management expects that a sustainable EBIT margin of around ten percent can be achieved within the next three to four years through further investments.
