injection molding company
pivotal strategies' services: transitional advisory
core proficiencies: operational assessment, global sourcing
pivotal strategies' role: advisory
company ownership: family owned
The company was an injection molding business whose product lines had inherently high turnover, thus requiring frequent and recurring investment in molds. The business was generating $80 million in revenue; however, sales were on an accelerating decline due to the company's inability to compete on price while maintaining margins essential to its profitability.
The company had primarily purchased molds manufactured in the U.S. at an average price per mold of $150,000. It had recently begun to purchase molds manufactured in Asia at an average cost of $50,000 per mold. However, the quality of the offshore molds was so poor that the savings in purchase price were quickly more than offset by additional maintenance and exorbitant down-time costs.
A Pivotal Strategies professional was retained to perform an operational assessment for the company. It became quickly apparent that the combined cost of molds, and labor related to mold issues and down-time, were severely impairing the company's ability to be price competitive.
With long-standing relationships in China, the Pivotal Strategies professional was able to introduce the client to alternative mold manufacturing sources and assist in negotiating all relevant terms of a supply agreement. The company received its first mold from a new Chinese source within one month and had it fully tested and approved over the next two months. Within six months, the company went exclusively with the new source.
The company's procurement costs were reduced to an average of $15,000 per mold. The quality of the molds was far superior to that of the previous source and comparable to that of U.S. equivalents with ten times the procurement costs. In the first year after the shift, the company realized cost savings of approximately $5 million through reduced procurement costs and costs associated with maintenance, repairs and down-time. It was successful in stabilizing its sales levels through more effective competitive pricing.