Operations Strategy

Designing operations strategies - You don't have to be a clairvoyant, but you need a vision

There is no ebb to the tide of reorganization. But companies are refocusing their attention: eliminating the mistakes of the past is not enough any more. What is needed are plans for the future. This is the only way to achieve a sustainable increase in sales and revenue.

Future-oriented strategies have to be developed for essential elements in the value chain - research and development, purchasing, manufacturing, supply chain management & logistics, and working capital and complexity management. And this is where the Operations Strategy Competence Center of Roland Berger Strategy Consultants comes in. We aim to assist you in the development and realization of the business ideas of tomorrow. Achieving this requires vision, action, and methodological support. Roland Berger offers you an integrated approach to the strategic reorientation of your value chain and increases company value with creativity and proven expertise - we deliver creative strategies that work.

Our project examples:

Client issues

Having at one time been the largest TV manufacturer in China, our client had over the previous two years experienced difficulties as the result of a pricing war. Net profit was being continuously squeezed due to increasing costs and declining revenue. Cost cutting became the most important topic on agenda of the client’s top management as a strong boost in in sales seemed not to be feasible in the short term. As a leading consulting firm with proven performance in Strategic Sourcing, Roland Berger was invited to initiate strategic sourcing and procurement restructuring.

Project Approach

A project team consisting of strategic sourcing specialists and industry experts who had rich experience in sourcing practice as well as strong know-how in the electronics industry was established. The objective of the project was to realize immediate savings as well as to establish a platform for ongoing improvement.

After a quick assessment of procurement spending and its impact on the client’s business, the team selected 5 procurement categories and 6 key suppliers for a pilot case.

The team developed a unique sourcing strategy for each individual category by leveraging various methodologies including, among others, best price analysis, strategic bidding, supply structure changes, specification improvement, and process optimization. In addition, the team helped the client to establish strategic partnerships with major suppliers and achieved win-win solutions through implementation of joint purchasing, early supplier involvement in product design, and VMI. To make ongoing improvement possible, the team looked into the client procurement system and identified more than 100 improvement initiatives through benchmarking with best practices.

Impact

The project was completed with striking benefits to the client. Approximately 20% savings were achieved in 5 selected categories. Given that the price of raw materials had risen significantly, the savings greatly exceeded the expectations of the client. The project also equipped the client with much more efficient procurement organization and processes which were rolled out across the company as well as with suppliers.

Client Issues

The client was a worldwide technology leader for their products and held dominant market share in nearly all major markets. However, while more and more competitors were moving their production bases and strategic business centers to China to achieve lower manufacturing costs, the "sourcing in Europe, assembling in Europe" strategy adopted by our client created a significant disadvantage in cost and increased pressure on pricing. Consequently, its market share was under threat. Sourcing in China to achieve cost reductions became a strategic opportunity which would have an immediate and positive impact on the business of the client. With expertise in strategic sourcing and insight into the China market, Roland Berger was invited to conduct strategic China sourcing for client.

Project Approach

To help the client establish a qualified supply base in China and to realize the greatest possible reduction in costs was the primary goal of the project. A project team was assembled that included industry experts and sourcing specialists. Because the guiding principle of the client was "high variety, low volume," the team designed and applied a three-step approach accordingly.

First, pilot categories for a first wave of strategic China sourcing were selected based on the client's current procurement categories as well as on characteristics of manufacturing sectors in China. Relevant supply markets were evaluated to understand key drivers for market development and to identify key players. Various supplier information was input into the database for systematic analysis. The team then identified potential supplier candidates for each category following multi-round filtering using customized criteria and after detailed supplier profiles were documented.

Second, a joint team consisting of Roland Berger consultants and the client's technology and sourcing specialists designed a set of supplier audit criteria. The joint team performed a comprehensive evaluation of the qualifications of potential suppliers through on-site audit and drew conclusions regarding the list of target suppliers for RFQ (request for quotation).

Third, the project team designed an RFQ package and conducted in-depth analysis of suppliers' quotations based on a cost break-down model to determine a reasonable price level for each product. The team also assisted the client in reaching agreement with target suppliers while ensuring that its requirements on technology, quality, and commercial settlement were well satisfied.

Impact

The results of the project provided the client with great potential for savings. Based on agreements with suppliers, the client would be able to achieve cost savings of up to 40% for all pertinent products. Through knowledge transfer, the client acquired a better understanding of China in general, as well as of relevant supply markets, and mastered strategic sourcing skills. These improvements made it possible for the client to initiate strategic sourcing in additional categories.