10-10-2025
Help to identify the “real” business issues
Far too often, leaders jump to conclusions about the issues faced by their business. This can lead to wasted time and money if the root causes have not been identified.
Here is a real-life example.
Background
A precision engineering business was producing mechanical transmissions for the defence industry.
Expecting the market for these products to decline, the business decided to diversify into the aerospace sector, on the assumption that it would be a good match for their manufacturing capabilities and that it would generate higher margins.
A sales campaign was launched and soon contracts were won with prestigious aerospace OEMs to manufacture high precision components and transmissions on a “make-to-print” basis.
The influx of new aerospace contracts increased the manufacturing workload significantly.
Perceived Issue
The production control system struggled to cope with the increased volume and variety of parts to be manufactured, leading to unreliable delivery schedules and increased manufacturing costs.
Despite persistent focus of the whole management team on trying to improve control of production, the business kept missing deadlines and manufacturing costs kept increasing.
It was then deemed that the production control system was inadequate and had to be replaced with a more powerful and easy to use system.
The management team decided to get help from an external consultancy to select the most appropriate production control system.
External review
The external consultancy started by collating and analysing data about the whole business.
This highlighted several issues: -
- Most machines in the large manufacturing facility were under-utilised and could not produce parts cost effectively due to their limited capabilities and lack of automation.
- The company relied on many local sub-contractors, who struggled to meet demanding and ever-changing schedules, resulting in the delivery of sub-standard parts.
- Most of the aerospace contracts were loss-making as the sales had been achieved by under-cutting prices in a fiercely competitive market.
- The military transmissions failed to meet the requirements in service due a drastic drop in the quality of one of the key bought-out components.
- The prices of military transmissions had not been increased for several years as the sales team was focussed exclusively on aerospace contracts.
Revised conclusions
It became clear that the inability of the production control system to cope was not the "real" issue.
Instead, the management team concluded that: -
- In-house manufacturing had to be drastically simplified to focus exclusively on the essential and complex parts that the business could produce effectively.
- All general machined parts should be outsourced to a specialist sub-contractor capable of making them more efficiently and cost effectively.
- Unprofitable “make-to-print” aerospace manufacturing contracts should be terminated in a controlled manner with customers as the business could not compete on price on products for which it did not own the design.
- The technical team should focus on resolving the quality issue of the key outsourced component that was causing the military transmissions to fail in service.
- Commercial efforts should resume on negotiating price reviews with defence customers.
Outcome
A far-reaching make-buy exercise was carried out internally with minimum external specialist support.
On completion: -
- 50% of the in-house manufacturing workload was outsourced.
- The number of sub-contract suppliers was reduced from over 20 down to 2.
- Headcount was reduced by 30% in a phased plan agreed with the trade unions.
- 45% of the shop floor space was vacated.
As a result, and having re-focussed on its core defence market, the business returned to profitability. The technical issue with the military transmissions was fixed and the vacated floor space was used for a large fabrication contract won by the parent company.
Lessons learnt
- The external consultancy did not tell the management team anything they didn’t know but it opened their eyes on the fact that the production control system was not the "real" issue.
- The make-buy exercise was carried out internally, having realised that the business was better placed than an external consultancy to identify and implement the solution best suited to their needs.
Need for Help?
I help leaders of small and medium-sized engineering companies to identify and deal with the “real” issues so they can achieve profitable growth.
To discuss your specific challenges and explore how I could help you, please use the link below to arrange a free 30-minute conversation.