Restructuring Overlays Converter Plants
based subsidiary of a Norwegian conglomerate manufactures, markets and
a line of impregnated overlays at three U.S. locations, designed for
use in the
composite panel, plywood and laminating industries.
Products include a phenolic glue film, phenolic surface
medium density overlay, paint base overlay, H-ply backing sheet,
polyester overlay, edge banding, and release sheets.
company bought a paper overlays business located on the northwest U.S
and wanted to assess its capabilities. But
recently, the company added two new converter lines to one of the
other original facilities, and with the purchase of the new facility
two converter lines and a resin plant, the company now had excess
capacity between three locations.
Consulting Group was asked to review production operations at
all three plants and determine where products should be most
manufactured. The objectives of the
- Conduct an operational audit at the
acquired plant to identify what changes can be enacted in the short
term to improve operations
- Review and
assess production capacity
three plants, and develop a production plan to determine where products
should be most effectively manufactured
initially rationalized the newly acquired plant to determine its level
capacity, throughput, utilization and quality. Following
that, we reviewed and rationalized plants 2
& 3, and
developed a comparison between the three.
benchmarked productivity, inventory turns, product line gross margins,
wages, quality performance and cost per MSF.
We analyzed current technology employed and line speed for all
converters and sheeters. Finally we rationalized production volume,
and utilization each converter at all 3 plants.
determined that the converters at plants 2 & 3 were not running at
fullest capabilities with utilization ranging between 26-64%. We
then examined the supply chain logistics
to determine where best should product line converters be located in
proximity to their respective markets.
performed a comprehensive cost/benefit
analysis of six alternatives
that ranged from outsourcing the resin plant, downsizing one plant and
converters to other facilities, to closing an entire plant and
converters to the other remaining two facilities. We
also compared the risk of investment, probability of a successful
implementation, and time- to-implement each alternative.
alternative #3, that
one converter line be moved from the new plant to plant #1, downsizing
plant, and outsourcing the resin plant. This
allowed excess land and buildings to be sold, and
to be substantially reduced by 35%, with a payback of less than 6
months. We also recommended redesigning
the supply chain
by shifting production of phenolic products to plants closest to
closing the distance of product to market and substantially reducing
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