
The shipbuilding equipment industry exhibits a unique combination of characteristics, blending the project-based nature of heavy industries like construction with the standardized, repetitive nature of commodities. While cost estimation and management tend to be more straightforward than traditional project-based sectors, the industry’s reliance on tight budgets for individual contracts and its cyclical demand tied to the broader shipbuilding market introduce significant complexities in planning and operational management.
Background and Context
The client, a leading marine engine manufacturer, transitioned from being a corporate group subsidiary to a standalone entity after its acquisition by a private equity fund and strategic investors. Despite being recognized as a global top-tier player with advanced management capabilities, the client operated under constraints as a group subsidiary, limiting its agility in pursuing operational improvements. Furthermore, the business model’s dependence on licensed design technologies constrained flexibility in revenue enhancement.
Looxent partnered with the client to retain the strengths of its existing management practices while identifying and addressing opportunities to enhance value across estimation, procurement, and production processes.
Maximizing Opportunities Post-Divestiture
The divestiture from the corporate group presented a dual opportunity: identifying inefficiencies inherent in group policies and exploring growth avenues previously constrained by group dynamics.
Addressing Inefficiencies in Group Policies
As with many corporate subsidiaries, the client was required to use group-affiliated services, which often led to cost inefficiencies. Key areas of focus included indirect procurement costs, particularly IT maintenance and insurance policies. Post-acquisition, the client evaluated alternatives to group services, leading to notable cost savings. For example, renegotiating select insurance policies achieved a 20% reduction in expenses.
Unlocking Growth in the Parts Business
The parts business, with its higher profitability compared to main product lines, had historically lacked adequate support due to internal group dynamics. Inventory management emerged as a critical area for improvement, as the lack of strategic stockholding limited responsiveness to customer demands.
Looxent facilitated:
- Inventory Justification: Demonstrating the need for stockholding to support sales responsiveness.
- Inventory Strategy: Defining appropriate stock levels by revenue scale and identifying critical components for stocking.
- Operational Framework: Establishing necessary infrastructure and processes to manage inventory efficiently.
This initiative also included redefining organizational structures and workflows to support the expansion of the parts business, aligning with internal stakeholders for smooth implementation.
Establishing Robust Estimation and Investment Decision-Making Criteria
The nature of project-based industries requires accurate bidding processes. However, conflicting priorities between sales (seeking competitive pricing) and procurement (favoring conservative cost buffers) often led to inconsistencies in estimates.
Improving Bid Reliability
Looxent introduced a framework to predict profitability for prospective bids, leveraging:
- Historical component purchase data.
- Analysis of recent project performance against cost estimates.
This approach provided a standardized method for evaluating the financial viability of projects, mitigating risks associated with underpriced contracts.
Capacity Planning and Investment Evaluation
With the shipbuilding market recovering and order volumes increasing, precise capacity planning was essential. Looxent developed a capacity modeling tool incorporating:
- Order mix variations.
- Standard labor requirements by product type.
- Workforce dynamics, including planned retirements.
This model enabled scenario simulations, guiding investment decisions to address bottlenecks and optimize capacity for 2019–2020.
Additional Value-Up Activities
The project also addressed:
- Feasibility assessments for outsourcing specific processes.
- Cost reduction strategies for in-house subcontracting.
Results and Impact
By focusing on actionable improvements and minimizing unnecessary activities, the Value-Up initiative enhanced operational efficiency while leveraging the client’s strong internal capabilities. Supported by a recovering shipbuilding market, the client is poised for substantial performance improvements. Looxent’s targeted interventions provided a robust foundation for sustainable growth, positioning the client to capitalize on market opportunities effectively.
The shipbuilding equipment industry exhibits a unique combination of characteristics, blending the project-based nature of heavy industries like construction with the standardized, repetitive nature of commodities. While cost estimation and management tend to be more straightforward than traditional project-based sectors, the industry’s reliance on tight budgets for individual contracts and its cyclical demand tied to the broader shipbuilding market introduce significant complexities in planning and operational management.
Background and Context
The client, a leading marine engine manufacturer, transitioned from being a corporate group subsidiary to a standalone entity after its acquisition by a private equity fund and strategic investors. Despite being recognized as a global top-tier player with advanced management capabilities, the client operated under constraints as a group subsidiary, limiting its agility in pursuing operational improvements. Furthermore, the business model’s dependence on licensed design technologies constrained flexibility in revenue enhancement.
Looxent partnered with the client to retain the strengths of its existing management practices while identifying and addressing opportunities to enhance value across estimation, procurement, and production processes.
Maximizing Opportunities Post-Divestiture
The divestiture from the corporate group presented a dual opportunity: identifying inefficiencies inherent in group policies and exploring growth avenues previously constrained by group dynamics.
Addressing Inefficiencies in Group Policies
As with many corporate subsidiaries, the client was required to use group-affiliated services, which often led to cost inefficiencies. Key areas of focus included indirect procurement costs, particularly IT maintenance and insurance policies. Post-acquisition, the client evaluated alternatives to group services, leading to notable cost savings. For example, renegotiating select insurance policies achieved a 20% reduction in expenses.
Unlocking Growth in the Parts Business
The parts business, with its higher profitability compared to main product lines, had historically lacked adequate support due to internal group dynamics. Inventory management emerged as a critical area for improvement, as the lack of strategic stockholding limited responsiveness to customer demands.
Looxent facilitated:
This initiative also included redefining organizational structures and workflows to support the expansion of the parts business, aligning with internal stakeholders for smooth implementation.
Establishing Robust Estimation and Investment Decision-Making Criteria
The nature of project-based industries requires accurate bidding processes. However, conflicting priorities between sales (seeking competitive pricing) and procurement (favoring conservative cost buffers) often led to inconsistencies in estimates.
Improving Bid Reliability
Looxent introduced a framework to predict profitability for prospective bids, leveraging:
This approach provided a standardized method for evaluating the financial viability of projects, mitigating risks associated with underpriced contracts.
Capacity Planning and Investment Evaluation
With the shipbuilding market recovering and order volumes increasing, precise capacity planning was essential. Looxent developed a capacity modeling tool incorporating:
This model enabled scenario simulations, guiding investment decisions to address bottlenecks and optimize capacity for 2019–2020.
Additional Value-Up Activities
The project also addressed:
Results and Impact
By focusing on actionable improvements and minimizing unnecessary activities, the Value-Up initiative enhanced operational efficiency while leveraging the client’s strong internal capabilities. Supported by a recovering shipbuilding market, the client is poised for substantial performance improvements. Looxent’s targeted interventions provided a robust foundation for sustainable growth, positioning the client to capitalize on market opportunities effectively.