The issue
To support a corporate restructuring effort at a global automotive components supplier, PricewaterhouseCoopers was engaged to conduct an independent review of its manufacturing footprint, with special emphasis on identifying areas of overcapacity. The client realized that it faced three significant issues: (1) it had followed key customers to global markets without a strategic expansion plan in place, (2) it was overly dependent on a small number of automaker customers, and (3) its portfolio of supply contracts or "book of business" had grown organically over time, with little thought given to implementing an integrated strategic risk management process.
Our approach
The PricewaterhouseCoopers Automotive Institute maintains an independently derived, global forecast of light vehicle assembly, capacity and powertrain consumption at the region, country, manufacturer, plant, platform, and nameplate levels of detail. As such, PricewaterhouseCoopers was uniquely qualified to perform the high-level capacity assessment for the global supplier client. Automotive Institute staff used the forecast data as the foundation for a strategic analysis of the supplier's global footprint --- focusing primarily on areas of under-utilization in the supplier's manufacturing system --- from the perspective of current market conditions, future trending and key competitive pressures. The analysis was also designed to compare the supplier's forward demand projections against the Institute's internal forecast, with the intention of examining individual points of disagreement between the two datasets and exposing potential risks for the supplier going forward.
The outcome
This engagement resulted in the client adopting several recommendations to address its global overcapacity issue, including customer diversification strategies, programme targeting optimization, and dynamic portfolio management. The client was able to clearly identify risk issues at a granular level of detail as a first step in the process of creating a strategic vision regarding it manufacturing footprint around the world. This preliminary engagement also resulted in further discussions with the client regarding the potential to explore lower-cost manufacturing locations.
