Analyze cost data and operational performance data to determine overall operations effectiveness and potential for cost reduction after acquisition. Data analysis, interviews, and on-site production observation revealed that significant operations problems were drivers of excessive costs.
Cost driver analysis revealed the plant cost structure to be dominated by hourly labor costs and some extremely high-cost capital equipment.
Labor cost was shown to be much higher than necessary, due to ineffective plant scheduling, causing a monthly hockey stick effect at the end of the month. This was the least linear production schedule we had ever observed.
Labor cost was also excessive due to generally poor workforce discipline and an abundance of poorly maintained, out-of-date equipment. High capital cost was due to several recent investments in fully automated, but completely inefficient, pieces of equipment: