Situation:

• Earnings growth had been stalled for nearly 12 months
• Managed engaged Inside Consulting to find rapid cost and revenue opportunities capable of delivering sustainable growth

Insights and actions:

• A detailed analysis of supply chain labor costs identified a key make-buy opportunity. Outsourcing installations to local pipefitters on a contract basis improved utilization and reduced travel costs, eliminating the need to mobilize teams across cities. The client also realized average rate reductions by tapping into both union and non-union labor pools, compared to a previously 100% unionized model.
• A comprehensive review of outside spend drove direct and indirect material price savings averaging over 15%. Beyond price, significant demand-related savings were achieved by redesigning elements of the product, accounting for nearly 40% of total cost reduction. The highest-impact opportunity came from redesigning the operating CPU and software, enabling use of existing customer networks for component communication and eliminating the need to independently route wiring throughout each facility. Labor savings from this change alone exceeded $1 million.
• Demand elasticity and price analysis revealed that many specified spare parts were comparatively inelastic and underpriced. A series of pricing pilots confirmed the analytical findings and addressed sales concerns about the impact of price increases on customer satisfaction.
• A review of the contract maintenance program identified pockets of under-penetration among smaller customers. Additionally, many maintenance offerings were highly customized yet priced equivalently to standard packages. We partnered with Sales Operations to develop targeted incentives and establish tracking for market penetration and price realization.

Impact:  

• Increased EBITDA over $8M over a 12-month period, and $10M over a 5-year period.