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INDUSTRY: Automotive Manufacturing
SERVICES: MOVE Methodology: Layout Optimization. Material Flow. Warehouse (WH) Visualization.

Situation.

A high-volume precision machining customer, who provides components to a leading Tier 1 manufacturer, was experiencing late-open sourcing changes that were leading to program launch milestone delays. To aid in supporting the production ramp up, an analysis and re-evaluation of warehouse space, capacity review, and layout optimization was deemed necessary. The client requested to optimize material flow, consolidate excess inventories, and design “best in class” processes, and needed Seraph’s expertise to reach these goals.

Actions.

3 key work packages were identified:

WORK PACKAGE 1

Objective:
Optimize material storage and flow

Deliverables:

WORK PACKAGE 2

Objective:
Focus on warehouse visualization and capacity review for the client’s customer

Deliverables:

WORK PACKAGE 3

Objective:
Focus on headcount and organization structure optimization and MDI

Deliverables:

Seraph’s internal process are tailored to meet the needs of the situation and provide a seamless transition to the new facility.

The MOVE methodology has three keys to success:

  1. PLAN: Develop a structured, meticulously detailed, and clear, Project Management Plan – “If we fail to plan, we plan to fail.”
  2. DON’T LOSE SIGHT OF THE PEOPLE: Relocation and consolidation is more than product and process, it is People – “Success or failure always depends on people.”
  3. GOOD TEAM COMPOSITION: Balance the skills and interpersonal dynamics to create a high-performance Team – “…can and will influence results.”

Seraph effectively drove and completed all work packages, training the team to ensure future success.

Seraph effectively drove and completed all work packages, training the team to ensure future success.

Supply Chain
Organizational Alignment

Results.

WORK PACKAGE 1

WORK PACKAGE 2

WORK PACKAGE 3

Seraph saved the client money in the short term with initial savings during the project as well as long-term savings after the project’s end.

When plants are under capacitized, footprint consolidation is a necessary strategic process for organizations to remain competitive in an ever-changing and increasingly competitive market. This strategy focuses on optimizing an organization’s facilities, resources, and production processes to reduce costs and enhance efficiency. Within manufacturing, developing contingency plans for footprint consolidation is crucial to ensuring long-term success and resilience by responding to changing market conditions. 

Learning from 2008  

The 2008 financial crisis was a global economic catastrophe triggered by a combination of factors, including unsustainable mortgage lending, the collapse of the housing market, and widespread financial deregulation. The crisis led to a severe economic downturn, resulting in massive job losses and financial hardship for individuals and businesses alike.

As a business highly reliant on available financing for customers, the automotive industry faced the brutal consequences of the crisis. The resulting declining consumer demand for automobiles, coupled with financial challenges faced by major manufacturers, led to a restructuring of the industry. Many automotive companies were forced to seek government assistance or declare bankruptcy. The crisis highlighted the need for businesses to be proactive in identifying potential risks and developing effective contingency plans to mitigate them. 

Benefits of Footprint Consolidation in Automotive Manufacturing 

The demand for vehicles has been very strong over recent years, but an economic downturn is inevitable. No one really knows when it will happen, or how fast it will come when it does. But those who plan for it will be the ones able to act quickly when the challenge arises.    

There are several benefits to proactive planning for footprint consolidation. Although “no plan survives contact with the enemy,” a good plan will provide a framework for rapid cost reduction and improved efficiency, better utilizing the available resources. 

A leaner and more efficient manufacturing operation allows automotive manufacturers to efficiently adapt to changing market conditions and customer preferences. With optimized resource usage, companies can better focus on innovation, product quality, and meeting customer needs. This ultimately strengthens their competitive position in the industry. 

Developing Contingency Plans for Footprint Consolidation 

In order to stay ahead of the curve and respond proactively instead of reactively to threats, manufacturers must have a suite of contingency plans. Manufacturers must begin by analyzing current risks, their current manufacturing footprint, and establishing goals and plans for consolidation. 

The first step to developing a contingency plan for footprint consolidation is to identify the potential risks and challenges the future may present. These may be things like economic downturns, technological disruptions, natural disasters, and supply chain disruptions. This step is crucial to understanding the potential triggers for footprint consolidation and, by understanding the trigger, a contingency plan can be made. 

The next step is to analyze existing facilities and operations, including the locations of manufacturing plants, assembly lines, and distribution centers. This assessment should identify potential redundancies, inefficiencies, and areas for improvement. It should also factor in which products are most likely to remain in demand in a downside scenario. With an understanding of the current manufacturing footprint and potential risks, manufacturers can set specific goals and objectives for footprint consolidation. These should be aligned with the overall corporate strategy and focused on improving efficiency, reducing costs, and enhancing the company’s competitive advantage. 

Any contingency plan should outline the steps necessary to achieve the consolidation goals. This includes identifying sites for consolidation, evaluating resources and capacity requirements, and establishing a timeline for implementation.  

Scenario Analysis 

One of the best ways to develop contingency plans for footprint consolidation is through scenario analysis. The correct contingency plan for an economic downturn will likely not look like the same contingency plan for a collapse of lower-tier suppliers. This requires a case-by-case scenario analysis and rank-ordering of the most likely and most detrimental scenarios. Some threats may require manufacturing expansion, while others may require near-shoring or reshoring. 

Implementing the Consolidation Plan 

Any consolidation plan must be developed with criteria in mind for what will trigger the implementation of the contingency plan. Otherwise, companies risk overreacting to minor market movements, which could be worse than not having a contingency plan at all. Before the plan is ever implemented, it must be communicated to the stakeholders and approved by the company’s leadership team. Open communication with stakeholders, including employees, suppliers, and customers, is essential to gain buy-in and support for the consolidation process. Transparent communication helps alleviate concerns and ensures everyone understands the reasoning behind the plan and the expected benefits. 

Employees must also have a basic understanding of the consolidation plan. Footprint consolidation can be a challenging process that often involves workforce adjustments, such as relocations, layoffs, or reskilling. Providing resources and support to employees can help them understand the role they will play in any consolidation and what their options are in the event that a consolidation becomes necessary. Providing resources and support to affected employees is crucial for maintaining morale and ensuring a smooth transition. Transparent communication, employee training, and engagement programs can help build trust and foster cooperation during the process. 

After implementing the consolidation plan, the leadership must track progress against the plan’s objectives and milestones to determine if any modifications are necessary. By monitoring progress, automotive manufacturers can identify potential issues, make data-driven decisions, and adjust the plan as needed to maintain momentum and stay on track. 

Conclusion 

Contingency plans for footprint consolidation are a necessary part of any manufacturing company’s future, especially after the 2008 financial crisis and the pandemic. While it’s good practice for companies to engage in footprint consolidation planning, it’s also worthwhile to engage in constant kaizen cycles to improve operational efficiency. There is a balance to be struck between optimizing for efficiency and leaving enough meat on the bones during times of scarcity. To help create an environment of optimized operational efficiency, our team of specialized operational consultants are trained to act as a support structure and optimize logistics operations from day one. Our advisors are former management at many suppliers and OEMs and are experts in production, operational efficiency, and crisis management. Contact us today to schedule a discovery call, or see our case studies for more information.

The trend of companies moving their manufacturing operations from the United States to China was prevalent in the late 20th and early 21st centuries due to China’s lower labor costs and lax regulations. However, within the past decade or so a concerted plant reshoring effort has emerged among many manufacturers to bring their manufacturing back to North America, particularly the United States. This trend has been driven by a variety of factors including the increasing cost competitiveness of North American manufacturing, the desire to reduce reliance on global supply chains and be closer to customers, and access to advanced technologies and skilled labor.

The Exodus of North American Manufacturing 

The United States lost much of its low-tech manufacturing base to China in the late 1990s and early 2000s as the country became part of the consortium of World Trade Organization countries. One major factor contributing to this move was the significantly lower labor costs in China, making it an attractive location for outsourcing. In addition, China’s low labor and environmental standards made financial sense for companies to shift the lower portions of their supply chains there.  

The benefits of manufacturing in China for companies were numerous. In addition to lower labor costs, China also offered a large pool of skilled labor and a favorable exchange rate for U.S. companies. Additionally, China’s infrastructure and transportation systems made it easier to import raw materials and export finished goods to other countries. 

However, in recent years, many companies have chosen to re-shore their manufacturing to the Americas, particularly to the United States. The trend started around 2012 as the threat of political tensions loomed large on the horizon and national security became more linked to a solid manufacturing base. The COVID 19 pandemic put a fine point on national security as every country in the world came to rely on the many medications and personal protective equipment that originated from Chinese manufacturing. Additionally, civilian manufacturing in the years after the COVID 19 pandemic has been anything but smooth sailing. Rolling lockdowns in China have caused downstream effects on manufacturing. As a result, many companies such as Apple, Samsung, Amazon, and Microsoft are moving some of their manufacturing to other countries. 

Factors Contributing to the North American Manufacturing Renaissance 

Several factors are contributing to the resurgence of manufacturing in North America. One major factor is the increasing cost competitiveness of North American manufacturing compared to other regions. Labor and transportation costs in China, for example, have been rising in recent years, while the appreciation of the Chinese currency has made it more expensive for U.S. companies to do business there. In contrast, the United States has seen comparative stability in labor costs and an increase in productivity due to the adoption of advanced manufacturing technologies and automation. 

Another factor contributing to the North American manufacturing renaissance is the increasing demand for domestically produced goods due to global supply chain disruptions. Events such as the COVID-19 pandemic have highlighted the vulnerabilities of relying on global supply chains and have led to a greater emphasis on domestic production. 

Finally, government policies and incentives have played a role in supporting the manufacturing sector in North America. Governments have implemented measures such as tax breaks and grants to support the development of advanced manufacturing technologies and the adoption of sustainable practices. Additionally, trade policies have been implemented to level the playing field for North American manufacturers competing with imports from other regions. It’s also important to note that North American manufacturing isn’t just growing because of relocated production, it’s also growing with new production. 

Companies Reshoring Manufacturing Operations to North America 

There are many successful companies and industries that have contributed to the North American manufacturing renaissance. 

One example of a company that has successfully adapted to the changing manufacturing landscape is Ford Motor Company. In the face of declining demand for traditional gasoline-powered vehicles, Ford has invested heavily in electric and hybrid vehicles, leading to a resurgence in the company’s manufacturing operations. In 2019, Ford announced plans to invest $11 billion in Tennessee and Kentucky for electric vehicle development and to bring 16 fully electric models to market by 2022. 

Another successful company in the North American manufacturing renaissance is Tesla, which has disrupted the traditional automotive industry with EV. Tesla has experienced rapid growth in recent years and has attracted significant investment, leading to the expansion of its manufacturing operations in the United States and Mexico. 

Other industries that have experienced growth and success in the North American manufacturing renaissance include the aerospace and defense sector, which has benefited from increased investment in advanced manufacturing technologies and automation. In addition, the medical device industry has experienced growth due to increasing demand for advanced medical technologies and the need to diversify global supply chains. 

Challenges For the North American Manufacturing Renaissance 

Despite the widespread growth of manufacturing in North America, the North American manufacturing renaissance has faced several challenges, including skilled labor shortages and the need for workforce development. As the manufacturing sector has experienced a resurgence, there has been an increased demand for skilled labor, which has led to a shortage of workers with the necessary training and education. This has led to a need for workforce development initiatives to provide training and education to the next generation of manufacturing workers. 

Another challenge facing the North American manufacturing renaissance is competition from other regions with lower labor costs. Some countries, particularly in Asia, still offer significantly lower labor costs than the United States, which makes it difficult for North American manufacturers to compete. 

Finally, there are also environmental concerns and the need for sustainable manufacturing practices. As manufacturing has become more advanced, there has been an increased focus on sustainability and the need to minimize the environmental impact of manufacturing processes. This has led to the adoption of sustainable practices such as renewable energy use and the reduction of waste and emissions. 

Conclusion 

The future of manufacturing in North America is bright, with many companies choosing to bring their operations back to the United States and other parts of the continent. Companies that are considering reshoring their manufacturing operations can benefit from the expertise of a team that has done it many times before, like Seraph, who can help them navigate the process and take advantage of government policies and incentives. With the right support and strategic planning, companies can successfully adapt to the changing manufacturing landscape and thrive in the promising future of manufacturing in North America.  

Thanks to our team of specialized operational consultants, Seraph can come alongside a new company and act as a support structure and begin adding value from day one. Our advisors are former management at many suppliers and OEMs and are experts in production and supply chain efficiency. Contact us today to schedule a discovery call, or see our case studies for more information.

Many OEMs as well as tier 1 and tier 2 suppliers are considering relocating and reshoring their plants to the Western Hemisphere. In the 90s and early 2000s, many manufacturers moved their plants from the USA and other Western countries to China for cost-effective labor and a relative lack of regulations. 20 to 30 years ago, this decision made obvious sense for many of the companies that shifted their manufacturing base. However, nearly all of the characteristics that made China an attractive location for manufacturing have deteriorated or disappeared entirely. Due to these changes and looming difficulties on the horizon, many factories are re-evaluating their site locations and looking back across the pond to the Land of Opportunity. 

Why Relocate or Reshore Your Factory 

There are essentially four things that have changed since the 90s rush to China, which have altered the rules of the manufacturing game. First, increasing quality of life within China has come with rising salaries. Rising salaries represent increased overhead for manufacturing and management. Rising inputs along with other factors like logistics costs make the USA competitive with manufacturing costs in China. Additionally, covid restrictions within the country have made rolling lockdowns and supply chain failures the rule instead of the exception. This so-called “zero COVID policy” has created a hostile manufacturing environment. 

Additionally, in the last 5 years or so, there has been a bipartisan recognition of the economic and defense threat that China represents to the USA. Various tariffs and prohibitions (most recently a microchip prohibition) are seen as escalatory and create a challenging business climate between the two countries. Finally, geopolitical distress between China and Taiwan further threatens global supply chains and critical microchip infrastructure. The likelihood of a Chinese invasion of Taiwan is growing, according to the opinion of most experts. The question remains as to what extent the USA would involve itself in this conflict. However, there is a chance that war in the Pacific may eventually find the USA and China in an open hot conflict over Taiwanese independence. 

Planning Factory and Plant Relocation Checklist 

Moving a plant, whether across the country or across the world, is a complex process. However, proper planning can help eliminate the possibility of disruptions and other setbacks. 

Plan Early 

The first thing to do with any factory or plant relocation is to plan the relocation early and comprehensively. Especially if the plant is moving from China to a North American country like the USA or Mexico, planning should be executed as early and quickly as possible. If conditions deteriorate further between the USA and China, Beijing could conceivably embargo any export of manufacturing equipment. Planning the move in advance will help mitigate risks while allowing for continued production during the move.  

Account For and Audit Machinery 

Before spending money to move machinery, it’s essential to examine amortization charts and see if the equipment costs more to move than its residual value. If the equipment is near the end of its useful life or its lease, it may be more efficient to simply purchase or lease new equipment at the new factory location, depending on export, import, and transport costs.  

When moving the un-abandoned equipment, it’s best to develop an inventory system to track which piece of machinery is being moved, when it should be moved, and where it’s going. Make records based on inventory tags so that all the information travels with the machinery. Additionally, take pictures of the machinery and take any notes to help serve as proof in the event of an insurance claim or other mishap.               

Review Your Supply Chain 

Before making any moves or preparing to shut down any machinery, examine the supply chain. Depending on how far the machinery needs to move, it may be necessary to search for new lower-tier suppliers and, potentially, 3PL companies. These relationships should be established before a single piece of equipment is moved to ensure there’s a constant stream of supply at the new location. Additionally, this lead time may be necessary to allow the supplier to ramp up production and service the new factory location. 

Plan Improvements Before You Move 

After being in a factory for even a couple of weeks or months, it’s obvious where the design flaws exist. When designing the new factory, take current problem areas into account so that they can be eliminated in the new design of the factory. A factory move is a rare event, but it is the perfect time to optimize the floor layout to be as efficient as possible at a near-zero cost. 

Plant Relocation Consultant 

With so many potential landmines to step on, hiring a plant relocation consultant is one of the wisest actions a company can take. Plant relocation consultants are constantly working with companies to make sure that their relocation is successful. They have walked the road so many times that they can point out the possible dangers and considerations months ahead of time. Internal project managers and the relocation team are often composed of highly competent professionals. However the task of relocation can be so demanding that they’re simply stretched too thin to keep up with the demands of the move. Seraph has a proven track record of both relocation and consolidation planning. Before any company begins planning on relocating, the best first step is to schedule a call with Seraph. 

Conclusion 

Relocating and reshoring is a monumentally difficult task, but with the right planning, preparation, and help, it is achievable. Seraph has helped transfer hundreds of production lines without sacrificing a single day’s supply to our client’s customers. Thanks to our team of specialized operational consultants, Seraph can come alongside a new company and act as a support structure from day one. Our advisors are former management at many suppliers and OEMs and know the relocation process inside and out. Contact us today to schedule a discovery call, or see our case studies for more information.

Welcome back to our series on successfully completing a Relocation & Consolidation Activity. In this third article covering Seraph’s Move Methodology, we present several of the key steps in successfully completing Phase 2: Plan. The overall Move Methodology is composed of four phases: Align, Plan, Execute, and Closure, shown in Figure 1 – MOVE Methodology Overview below.

Figure 1 – MOVE Methodology Overview

Our first two articles focused on the keys to successfully aligning the project requirements between all parties. The key components of that first phase are:

This first phase is responsible for producing several important outputs:

Product and Process Workstreams

During the Plan Phase, the team must confront the details.  The simplest way to understand the Product and Process Workstreams concept is through graphic representation. In Figure 2 – MOVE Methodology Project Structure, each distinct product workstream (noted by the vertical blue bars) is managed individually through the core business of process workstreams (noted by the horizontal grey bars).   For each unique customer or product workstream, the appointed leader will plan on how to address all processes needed to support the successful move of the product.

Figure 2 – MOVE Methodology Project Structure

For example, if product A is being moved from facility X to facility Y, the workstream leader will need to understand and plan, with a team to support, for all aspects. In the MOVE Methodology, we utilize several categories, including:

This process is repeated for each product group. Depending on the scope of the move (e.g. the number of products and locations), a relocation and consolidation project can grow large in both scope and team requirements. Done correctly, the planning phase will result in a detailed management plan and product/process workstream plans.

The workstreams are controlled, integrated and supported by a Core Team made up of project-level leadership. The Core Team is overseen by a Steering Committee of senior business stakeholders. 

Effectively Creating Detailed Plans

Creating detailed project plans requires a cross-functional team with the right framework. The tools and processes used to carry out these detailed plans blend standard project management tools with specific knowledge. The Seraph MOVE Methodology provides such a framework and utilizes an extensive checklist and toolset developed through years of experience managing production transfers, expansions, and reductions. When executed correctly, these plans lead to a successful outcome.

Conclusion

The plan phase of Seraph’s MOVE Methodology builds on the strategic alignment between Seraph and the client. In this second phase, the details begin to come together to understand what the team will accomplish, including both interim and final deliverables. It is in this phase that the details behind Who? What? and When? come into view using traditional project management tools. Once the master plans are in place, the team can move on to execution, which will be the subject of our next article.

Our first article showcasing the Seraph Relocation and Consolidation MOVE methodology, focused on the high-level alignment required for a successful outcome. These included:

Addressing these points creates a foundational framework to complete the strategic alignment process.  The remaining steps will encompass the remainder of the Align Phase.

Feasibility Study

The next step in the alignment process is to conduct a thorough feasibility study for each of the possible scenarios. There will likely be many options available. For a relocation project, options could address the extent of the relocation:


The feasibility should also take into consideration logistical and legal constraints, licensing, supply chains, and labor risks. Through a thorough feasibility study, many options could be ruled out, leading to the best possible outcome.

High-Level Project Plan

At this point in the project, the team should develop a high-level project plan. The plan is not intended to be used to execute day-to-day activities. Rather, this is the project plan that is used to communicate at the highest levels of the stake holders. This plan contains the key milestones for the project and shows the major dates for each of the larger phases of the projects. These can include dates for:

Process and Product Transfer Strategies

Relocation and Consolidation is much more than just shutting down at the sending location, moving the equipment, and starting up in the receiving location. Transfers require processes to be clearly identified, documented, and setup at the new location. Training must be done. Many times, these topics are overlooked. Does the new location have the expertise necessary and the systems to execute the various processes required? Effective plans address HR and IT needs in addition to production processes.

After the move, before normal shipments can resume, today’s customer will almost always require products produced at the new location to be prequalified. This could lead to significant increases in lead-times. Timing for testing, validation, run at rates and approval must be considered in the overall high-level project plan.

Supply Chain Transfer Strategy

Moving production locations can have a significant impact on the supply chain. Several questions should be asked, including:

The strategic alignment process should be done with care to ensure the best possible outcome for your project. A well-done strategic alignment will answer many of the input questions needed for the next step in the MOVE Method: Detailed Planning.

About Seraph:

Seraph’s team of operational managers and senior consultants intercede on our client’s’ behalf to fix a crisis that is putting the business at immediate risk, turnaround a situation that is damaging the bottom line or restructuring to improve the balance sheet. Seraph has successfully delivered projects in the following regions: The Americas, Europe, China, and India. Seraph’s Industry Expertise Includes Aerospace, Automotive, Energy Infrastructure, Healthcare, and Medical Devices. Through our other operating companies, we are continually looking for distressed situations where we can put our expertise and capital to work to create value.

Seraph delivers long-term operational improvements that help our clients transform their manufacturing operations.
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