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| Network Strategy >
Strategic Evaluation Process |
| | We provide unrivalled analytical depth, to provide the most robust platform for a restructuring business case.
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| Achieving the Lowest Cost Infrastructure
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Sizing the prize is one thing; achieving maximum bang for your restructuring investment is another.
With your least cost reference Network established, the next task is to ascertain how close you can get to it whilst maximising the return on the restructuring investment.
We do this by building highly accurate, predictive cost models which allow directors and managers to play what if games 10 years out into the future...
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| | - What is the value of vertical integration?
- What if we had fewer, faster lines?
- What if we had more flexible lines?
- What if we contract out some stages of manufacture?
- What if our demand for product X collapses / mushrooms?
- What if we manufacture in bulk and pack locally?
- ... and so on.
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| We then assemble options which test these questions. Each option represents a hypothetical future program of development for the infrastructure, which we plan year by year, line by line, working from the current situation out to a range of potential end games – for example:
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| | 1. Lowest cost investment route (Base Case)
2. Making existing sites as efficient/economical as possible
3. As 2, but including potential legislation requirements, e.g CO2 emmissions
4. Lowest capital cost single site
5. Make single site as efficient/economical as possible
6. As 5, but including potential legislation requirements
7. Pragmatic greenfield option
8. Ideal greenfield option
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These options can be used to generate investment routes (capacity development paths leading from the present to one of the end games) – which can then be modelled.
We use bottom up models, which for each year of each option:
- Optimises the loading of product demand onto each installed line by finding the least cost sourcing for the product mix;
- Computes the total production and distribution cash costs;
- Computes any one off costs (redundancy, recruitment, capital investments etc.).
Then the separate years are combined into a forward cash flow for each option, which can be compared to the Base Case on an NPV and IRR basis.
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| Using our models, we iterate with client teams, providing rapid and robust answers to the initial questions - and to the new questions that arise as the strategy starts to take shape. We call this process Numerically Assisted Thinking.
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