030114SHZWE044v5iCONFIDENTIALThisreportissolelyfortheuseofclientpersonnel.Nopartofitmaybecirculated,quoted,orreproducedfordistributionoutsidetheclientorganizationwithoutpriorwrittenapprovalfromMcKinsey&Company.ThismaterialwasusedbyMcKinsey&Companyduringanoralpresentation;itisnotacompleterecordofthediscussion.LOPDocumentDateManufacturingDiagnosticDRAFT030114SHZWE044v5i2•McKinsey'suniqueapproachformanufacturingimprovementandsuccesscases•Proposeddiagnosticapproach•Appendix–McKinseyqualification030114SHZWE044v5i35COREBELIEFSGUIDEALLMCKINSEY’SMANUFACTURINGSTUDY•Strategicthinking–Corporationsachievefullvalueonlywhenmanufacturingcapabilitiesarecoupledinatangible,specificwaywithoverallbusinessstrategiesandaspirations•Integratedoperations–Holisticapproachiscriticaltosuccess(i.e.,manufacturingisonecrucialelementwithinanintegratedoperationsstrategyandtightlyconnectedtoorganizationstrategy,expertise,andfunctions)•Continuous,systematicimprovement–LeanManufacturingmustbeasystemicimprovement–notadiscretemenuofimprovementoptions–thatcontinuallyeliminateswasteandmovesanorganizationtowardan“aspirationalendstate”ofcompletelyvalue-addingprocesses•Physicalandpeoplesystems–Sustainablevalueresultsfromcontinuousimprovement,whichrequiresongoingoperationalchangeaswellasculturalchange•Modelsystems,successreplication–ModelLeansystemsimplementedinitiallyinkeyareasquicklyhighlightsolutionsandclearlyindicatereplicablepathsfortheremainderoftheorganizationtofollowontheroadtocontinuousimprovementCorebeliefsinmanufacturingimprovement030114SHZWE044v5i4Mindsets&BehaviorEnsuresthat…•Behaviorsarealignedtosupportasustainablechange•AchangedynamicisinstitutionalizedMCKINSEYWORKSWITHCLIENTTODRIVESOLID,ALIGNEDANDMOTIVATEDMANUFACTURINGIMPROVEMENTSustainablefuturestateCurrentstateOperatingSystemEnsuresthat…•AssetsandresourcesareconfiguredandutilizedtodelivercustomervaluewithminimumwasteManagementSystemEnsuresthat…•Theorganizationandperformancemanagementisalignedtotheoperatingsystem•HRsystemsexistthatsupportgoodcapabilitybuildingandpeopledevelopmentMcKinsey’suniqueapproachformanufacturingimprovement030114SHZWE044v5i5MCKINSEYDESIGNSTHEPROGRAMINAWAYTOENSUREIMPROVEMENTHAPPENSINASYSTEMATICANDPHASEDWAY3-4weeks~20weeks1-2yearsLocation3DiagnosticWave1Wave2…WavenLocation2Company-wideroll-outLocation1CompanywideproductionsystemPilotareadeploymentOperatingSystemManagementSystemsMindsets&BehaviorTypicalengagementapproach030114SHZWE044v5i6CLIENTCASE1:AnAsianSteelCompanyClientsituationWhatwehavedoneImpactachievedPre-taxROCEPercent199919981997199612.710.76.84.9AnAsiansteelcofacingasteadydeclineinprofitability…DuringMcKinseyengagement(Apr’98–May‘00)•Extensiveoperationalimprovementprogram–mainlyTOP•Identifiedandachieved9%reductionincostbaseinthefirstcycleofTOP($80mn)•Morethan1000ideasrigorouslyimplemented•Morethan250clientmanagerstrainedinoperationsimprovementmethodologyAfterMcKinseyroll-off(Jun’00tillSep’02)•SecondcycleofTOPimprovementsidentifiedandachievedafurther5%reductionincostbase•Fulltimeteamofmorethan40managersstillexecutingimplementation,reportingtotheplantheadSteelcoisthelowest-costproducerofsteelintheworld-BusinessIndia,Aug2001‘01‘00‘99‘98‘97SteelcosaleablesteelcostRs000pertonofsaleablesteel7.37.88.27.97.8‘01‘00‘99‘98‘97SteelcomanufacturingexpensesPercentofsales32363734...
