United States:
Flight Plan To Recovery: Aerospace, Defense, Aviation & Space Case Study Series
08 April 2024
Alvarez & Marsal
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The Aerospace, Defense, Aviation & Space industry is
currently navigating a complex path to recovery in the aftermath of
global market disruptions and under the influence of political
headwinds, playing a critical role in national defense and economic
growth.
In our five-part case study series, "Flight Plan to
Recovery," A&M Aerospace, Defense, Aviation & Space
professionals will discuss the key operational, financial and
strategic issues affecting companies in the industry and provide
actionable insights and real-world solutions to address these
issues. We will highlight key areas companies should focus on in
the wake of the pandemic:
- Manufacturing Footprint Optimization
- Supply Chain Cost Reduction
- Product Portfolio Optimization
- G&A Optimization
- Transformation Office
It is critical to invest in an approach, understanding that
enterprise-wide improvements must support top-line growth. Each of
the elements we will discuss in this series directly impacts the
others, so merely addressing one issue will not maximize the
operational and financial value for the enterprise as a whole.
CASE STUDY: MANUFACTURING FOOTPRINT OPTIMIZATION
In the first case study of the series, we highlight
Manufacturing Footprint Optimization and its impact on a
global industrial and aerospace manufacturer and service
provider.
THE BACKGROUND
|
Situation:
- Stock price was down 50% from the 2018 high
- Revenue was down 15%, and EBITDA was down by 35% across the
prior three years
- Activist investors were demonstrating increasing interest
- A new CEO was instated in July 2022 shortly after other members
of the senior leadership team had been replaced
- A&M was brought in to assess opportunities in November
2022
|
Complications Leading to Situation:
- Heavily acquisitive culture with limited integration
activities
-
- 14 enterprise resource planning (ERP) systems with varying
levels of adequacy
- Limited key performance indicator (KPI) / performance tracking
ability
- Lack of stock keeping unit (SKU) profitability
transparency
- Poor controls to validate / track supplier pricing
- Redundant / non-value-add back-office activities
- Overlapping manufacturing capabilities at differing cost and
capability levels
|
THE CHALLENGE & OUR APPROACH
|
RESULTS DELIVERED |
Overlapping manufacturing capabilities at differing cost and
capability levels worldwide
- Reviewed site-by-site cost structure, technologies, capacities
/ processes and business plans
- Defined and evaluated possible footprint optimization scenarios
including customer proximity and long-term growth
- Created a business plan with financial factors, cash flow,
one-time costs and return on investment (ROI); prepared a master
footprint rationalization plan
- Supported negotiations with the Workers Council on legal and HR
implications in Germany and Italy, as well as Greenfield,
Indiana
|
- Industrial: Identified total margin
improvement opportunities of $13M from tactical price increases of
small volume SKUs and $9M from negotiating with negative and
dilutive customer accounts
- Aerospace: Identified a further margin improvement opportunity
of $3M on the remaining $27.2M of revenue
- Developed and left behind methodologies and sustainment tools
for the client to replicate at the remaining sites in their
portfolio
|
A&M has expertise in driving performance improvement across the
Aerospace, Defense, Aviation and Space ecosystems and the broader
industrial base. Our team's deep operational and functional
strengths, exceptional industry knowledge, and insight into market
drivers position us to assist clients in addressing various
challenges. From transaction support to operational enhancement,
supply chain optimization, and capital efficiency, our approach
consistently delivers substantial improvements and solid returns
for our clients.
Originally published by 01 April, 2024
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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