Turning around a failing manufacturing operation in China

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Background: Tractus was retained by long-time client Sorrelli Jewelry, a family-owned company that has been producing heirloom-style jewelry in China since 1999, where it has historically benefited from lower wages and general production costs. In recent years however, Sorrelli has experienced significant cost pressure from rising labor rates, skilled labor shortages, high turnover, strikes and the elimination of VAT duty drawbacks on exports. Costs were rising, quality was declining and the company was being forced to replace its plant manager every two years with limited success and persistently declining profitability.

Tractus was retained to help turnaround declining profitability from the client’s China operation, stabilize production and reduce employee turnover until production could be relocated to a lower-cost manufacturing location in Asia.

Project: Retained through its Business Incubator, Tractus took over operations management responsibility for 24 months and began a full technical and production resource audit, reviewing procedures, process charts and material flow compilations. Tractus conducted plant inspections and undertook deviations visualization exercises, reviewed management procedures and document inspections. Operations optimization analysis was also done on purchasing and inventory management procedures, supply chain inspection and analysis, planned production levels and requirements.

Finally, Tractus reviewed production and capacity limits for equipment and HR and mapped improvement for production process efficiencies. With a direct labor force of 170 employees, Tractus identified productivity stagnation at an index of 7.76 and was retained to lead the implementation of operations improvements.

Solution: Within the first three months of implementation, production levels stabilized and then increased by 35% allowing the company to reduce headcount by 14%. With the new levels of productivity achievement, the client was able to boost profitability, eliminate managerial turnover and terminate potentially disruptive and costly plans to relocate manufacturing operations outside of China.

The company has been able to successfully n-house Tractus operations improvements and reduce Tractus’ continuing operations management role to two site visits per month while continuing to improve production efficiency.

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