Automotive Manufacturer Supply Chain Restructuring
A $2 billion global manufacturer of automotive and large truck components found that several initiatives to grow the business and expand its capacity had brought about some adverse effects. For example, its significant short term debt service — coupled with execution failures — had resulted in reduced cash flows and operating losses. Facing this crisis, the company filed for Chapter 11 bankruptcy restructuring, and had replaced 90% of its senior management team within 5 months of filing.
The manufacturer was committed to transforming its operating structure from a "holding company" framework to a highly integrated operating company. The CEO, the Board, and the company’s restructuring professionals identified several core competency areas as critical to success. Having established that the supply chain was one of these areas, the company hired Supply Chain Edge to help.
Supply Chain Edge led a complete restructuring of the company's supply chain, focusing on critical vendors, synthetic leases, supplier contract assumptions, reclamation claims, asset transfers and disposals, and creditor committee inquiry analysis. In addition, we helped communicate the restructuring to operational associates, suppliers, and creditors.
Our work also included the development of a five year plan for the supply chain designed to secure Chapter 11 emergence approval. A key part of this plan was the development of an integrated sourcing and logistics organization with common policy deployment processes and performance metrics. Also critical to future success were our establishment of a global hedge team to address natural gas, aluminum, and steel sourcing, as well as a global leadership process and structure for materials management.
In addition to positioning our client for future success, Supply Chain Edge was able to produce several quick wins. For example, we helped boost on–time delivery from 82% to 96%, stretch days payable outstanding from 16 days to 57 days, and deliver $53 million in material and transportation productivity improvements. Most importantly, our client successfully emerged from bankruptcy within 20 months of filing, and remains a tier one automotive supply leader.
