Diversified Industries - Asset Optimization

Identifying and getting the most out of all your assets

Are you looking at the value contribution of all your assets?
Are these assets fully exploited to secure competitive advantage?
Can reorganizing better satisfy your customers’ needs?
Can rightsizing improve the financial situation?

When you look at ROA or ROIC for each of your facilities, do you find one or more that are not creating value and in reality are actually destroying value?

This can happen for any number of reasons: a shift in the market, the introduction of a new competitor, the restructuring of a major customer, etc.

Regardless of the reason your assets are not creating the value they should, it is important to recognize that fact and take the appropriate corrective action. One answer might be to consolidate or relocate some or all of your value-destroying facilities.

Clients have partnered with MTG to optimize their assets for a variety of reasons. For instance, to:

Leverage fixed costs over combined volumes
Obtain synergies from combining like technologies and resources
Downsize operations due to volume shrinkage
Take advantage of local government incentives, such as tax relief, worker training grants, etc.
Get away from work environments with low productivity and/or restrictive work rules

Our Approach

MTG has a systematic approach to Asset Optimization that focuses on ROA, ROIC, and earnings (cost reduction). This approach looks at not only tangibles: property, plant, and equipment; inventory; capital; construction, and revenues, but also the intangibles, such as the product development and introduction cycle; expertise and working application of best practices; product life cycle; product performance; goodwill; customer value; organization, and the supply chain.

We have found that it is difficult to do a good job of measuring the performance of all assets of a company. First, not all assets get the same returns, and stuffing them into the same line item hides those that don’t contribute much. Secondly, companies don’t identify all of their assets. Every firm has “assets” that aren’t line items on the balance sheet, but sometimes these are more important than the ones that are. Here are a few examples:

A construction equipment manufacturer is successful at building its products. However, the most important asset they have doesn’t appear on the balance sheet. It is the dealer network—the distribution system that gets product quickly and efficiently to the end users.
A bakery in Mexico is able to get same-day fresh bread to the most distant and remote grocery store they serve. Like the previous example, baking the bread is less important, and less valuable, than having the logistics in place to get it distributed quickly and cost effectively. And there’s not much line item investment required, compared to the ovens, mixers, and packaging equipment needed to produce the bread.
Another firm has an extensive roster of producing assets, totaling nearly a billion dollars in net investment. However, the firm’s most important asset is not the investment in fixed assets, it’s the very talented management team that oversees the operations—adding investments where the margins are improving or can be improved, and divesting those that are in decline.

The most important asset a firm owns may not show up on the balance sheet, and it might not be as obvious as those in the examples discussed above.

Our proven, systematic approach helps clients to identify, assess, and optimize their asset base. There are seven key elements to the MTG Asset Optimization Process:

Business objectives and optimization goal understanding
Initial planning and discovery process
Business case and financial decomposition
Plant visits
Scenario development and evaluation
Implementation planning
Implementation

Implementation Expertise

If the results of the assessment indicate a need to consolidate or relocate facilities, MTG has extensive experience in helping companies do so. We know it is essential to get the new or consolidated facilities up and running as soon as possible without causing disruption or production losses.

We will work with your staff to develop a consolidation plan that includes the following:

Space/inventory optimization plan
Capacity optimization
The impact of make-buy decisions
Mechanical, electrical, and brick and mortar changes required in the new facility
Safety-related changes defined by regulatory bodies
Employee participation and input to the move

Although up-front planning is critical to the success of the move, execution is where the real results are realized. It is during this time that MTG’s powerful implementation support is the most evident. We will be there every step of the way to assist you in achieving the identified benefits of the optimization effort.