IET, Inc.
3539 Glendale Ave
Toledo, Ohio 43614

Case Study 3-08750

Plant consolidation analysis.

IET provided studies to support a recommendation on where equipment should be moved to give the lowest overall operating cost and highest risk for success.

The Customer

A manufacturer of gas burners and gas piping for the recreational vehicle and home markets.

"The study provided objective data to make the best financial consolidation decision."

Division President

The Challenge

Our client was faced with declining sales, over capacity and too many manufacturing locations in the United States. They decided to close one manufacturing location and consolidate the needed equipment into existing manufacturing locations. The client was leaning toward moving the business to Mexico, but wanted an outside opinion. IET was hired to evaluate the available floor space at each location, the direct and indirect labor costs and the transportation costs. Once all comparative costs were calculated, a recommendation would be made on where the equipment would be moved to give the lowest overall operating cost and highest probability of success.

The Solution

IET utilized traditional IE tools and spreadsheet techniques to give an accurate and fair comparison of the current labor costs in the facility to be closed and what the labor costs would be if moved to the three other facilities. The three existing facilities had wide ranging labor costs, using union labor, non-union labor and foreign labor. Indirect labor requirements at all of the facilities were different and calculated based on available personnel already at the location. Baseline total labor costs (direct and indirect) were calculated for the facility to be closed and then comparisons were made with the other facilities to establish potential labor savings. Transportation costs for moving raw material, work in process and finished goods were also calculated and compared.

It was found that our client would realize an annual savings of over $1,000,000 in labor and transportation costs by closing one facility and moving all operations to an existing plant in Ohio. Although the current Ohio facility did not have enough space to accept all of the new business, certain operations could be left behind temporarily until a larger building could be located and leased. The Ohio plant also represented less risk because the work force was already familiar with the new equipment to be moved and would have less start up and operating problems. By utilizing IET’s services, our client made a better decision that saved more money and presented a greater chance of success.

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