Advanced analytics helps to deliver millions in recovered costs and creates a greener companyDOWNLOAD
A leading automotive original equipment manufacturer (OEM) faced a common but costly industry challenge: How to track, manage, control, and extract value from its tooling assets throughout the part life cycle. Advanced analytics made greater visibility into the supply chain possible, which enabled the company to close control gaps and capture value from the misplaced assets. The assets represent one-third of the total property, plant, and equipment (PP&E) of the company and the project was funded entirely by the scrapping and recycling of obsolete assets.
OEMs frequently invest $1 billion or more in tooling each year, representing a large percentage of their annual capital expenditure and a similarly large portion of their PP&E. When properly managed, active and obsolete tools are valuable assets. Over time, however, passive OEM and supplier business practices cause them to lose visibility into the location, usage, and condition of tooling. As visibility into the location of older tooling erodes, so does the opportunity to recycle or reuse the assets.
A prominent U.S. automotive manufacturer had not actively tracked its high-value tooling, which included large-scale injection molds, casting dies, forging dies, and stamping dies used to produce vehicle parts. Representing nearly a third of the company’s total PP&E, millions of tooling assets were spread globally across thousands of supplier sites. These assets were frequently moved or resourced without proper notification to the OEM, and occasionally tools were neglected, scrapped, or even used without OEM permission.
The OEM struggled to answer seemingly simple questions like: Where are all the tools required to produce this part? Are they marked according to our Global Terms & Conditions? Have they been resourced by the Tier 1 supplier? Do they require rework to become operational? Do I still need these tools, or can they be scrapped to generate cash or reused to conserve capital expeditures?
Are we paying the correct property taxes on this tooling? Are we treating our suppliers badly by abandoning the tooling at their facilities?
The company looked to Deloitte for a solution that would effectively and systematically provide better asset visibility. The Deloitte Tooling Process (DTP), a scalable and repeatable process, is designed to help companies identify and track misplaced assets in their supply chain. DTP ultimately enables them to recover costs, through reuse or recycling, by allowing them to react correctly to supplier tooling information.
Deloitte reviewed current production and service tools and inventoried past model and obsolete tooling. Data analytics was a key part of the solution, because incorrect data analysis and mapping can lead to incorrect tool status (and substantial costs are incurred in tool reconstruction and temporary interruption of part supply). The Deloitte process, methodology, and toolset helped the company systematically and efficiently inventory suppliers to control assets, identify part-to-tool linkages, and determine appropriate retention status.
A review of ~30 percent of the supplier sites has improved financial and operational control while generating more than $55 million in cash recoveries and cost avoidance value. Additionally, Deloitte helped the client to reengage and energize the supply base to better manage tooling assets moving forward.
Most remarkably, the project was completely funded by the scrapping and recycling of obsolete tools. The effort resulted in the recycling of more than 80 million pounds of steel, reducing the company’s carbon footprint by an estimated 48,000 tons on carbon dioxide.