Rationalizing and Restructuring Overlays Converter Plants

A U.S. based subsidiary of a Norwegian conglomerate manufactures, markets and distributes a line of impregnated overlays at three U.S. locations, designed for use in the composite panel, plywood and laminating industries.  Products include a phenolic glue film, phenolic surface film, medium density overlay, paint base overlay, H-ply backing sheet, decorative polyester overlay, edge banding, and release sheets. 

The company bought a paper overlays business located on the northwest U.S coastline and wanted to assess its capabilities.  But recently, the company added two new converter lines to one of the other original facilities, and with the purchase of the new facility containing two converter lines and a resin plant, the company now had excess overlay capacity between three locations.

Rockford Consulting Group was asked to review production operations at all three plants and determine where products should be most effectively manufactured.  The objectives of the assignment were:

1. Conduct an operational audit at the newly acquired plant to identify what changes can be enacted in the short term to improve operations
2. Review and assess production capacity at all three plants, and develop a production plan to determine where products should be most effectively manufactured
   

We initially rationalized the newly acquired plant to determine its level of effectiveness, capacity, throughput, utilization and quality. Following that, we reviewed and rationalized plants 2 & 3, and developed a comparison between the three.

We benchmarked productivity, inventory turns, product line gross margins, salaries, wages, quality performance and cost per MSF.  We analyzed current technology employed and line speed for all converters and sheeters. Finally we rationalized production volume, capacity and utilization each converter at all 3 plants.

We determined that the converters at plants 2 & 3 were not running at their fullest capabilities with utilization ranging between 26-64%.  We then examined the supply chain logistics to determine where best should product line converters be located in optimal proximity to their respective markets.


We performed a comprehensive cost/benefit analysis of six alternatives that ranged from outsourcing the resin plant, downsizing one plant and relocating converters to other facilities, to closing an entire plant and relocating the converters to the other remaining two facilities.  We also compared the risk of investment, probability of a successful implementation, and time- to-implement each alternative.

We recommended alternative #3, that one converter line be moved from the new plant to plant #1, downsizing the new plant, and outsourcing the resin plant.  This allowed excess land and buildings to be sold, and operating costs to be substantially reduced by 35%, with a payback of less than 6 months.  We also recommended redesigning the supply chain by shifting production of phenolic products to plants closest to markets, closing the distance of product to market and substantially reducing delivery times.

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