Case Studies

Vertical integration

Don't Bite the Hand that Feeds You
Desire to vertically integrate can be quite tempting when you see that other participants of the value chain are making good money. But chasing profits can be risky business when you irritate those that send you business.. Read more

 

Make or Buy
Manufacturing Strategically

Strategic outsourcing

Having the luxury of making your own products is great but may be costly. Often there are hidden costs that are not considered or properly allocated. Conversely, buying manufacturing capacity from someone else can have costs that are not easily understood and are not only financial. When offshore production is considered, there are quality issues to be resolved, replacement and warranty issues as well as additional time necessary to ship product over the ocean. Knowing when to make and when to buy are tricky but can be critical both strategically and financially.

Our client produced about half of their products domestically and the other half in China. The larger and more complicated products were made in the U.S. and allowed them to make product changes closer to shipment and test new products efficiently. It had been a very good decision for years, but when their sales declined with the economic downturn, they had not reevaluated their decision.

Genoa was able to assess the true costs and benefits of manufacturing on both sides of the pond as well as the strategic implications of making the decision. Ultimately, the decision was made to close down the U.S. manufacturing site and work with existing offshore vendors to produce the products. While the head of new product development was forced to take a couple extra trips to in the first season, all products were successfully transferred and costs were reduced by roughly twenty percent overall.

The next phase of this transfer is to reduce the time of order placement to fulfillment and create increased flexibility by leveraging international sales direct from the manufacturing facility to other parts of the world.