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Supply Chain Restructuring at an Automotive Manufacturer

  • To address reduced cash flows and operating losses, a global automotive and large-truck component manufacturer set out to transform several core competency areas, including its supply chain.

  • Supply Chain Edge worked with the company to restructure its supply chain and develop a long-term plan for supply chain and business success.

  • The company has improved on-time delivery by 17 percent and days payable outstanding by a factor of three, and has gained several million dollars in material and transportation productivity improvements.

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, including reduced cash flows and operating losses. Facing this crisis, the company filed for Chapter 11 bankruptcy restructuring, and had replaced 90 percent of its senior management team within five 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 of directors, 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, Supply Chain Edge helped communicate the restructuring to operational associates, suppliers, and creditors.

The project 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 was the 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 the manufacturer for future success, Supply Chain Edge produced several quick wins. These wins included boosting on-time delivery from 82 percent to 96 percent, stretching days payable outstanding from 16 days to 57 days, and delivering $53 million in material and transportation productivity improvements. These results helped the manufacturer to successfully emerge from bankruptcy within 20 months of filing and remain a tier-one automotive supply leader today.

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