Context

The client, a manufacturer of specialty steel products for automotive applications, faced gross margin pressures due to high raw material costs and low throughput. Simultaneously, working capital was tied up in excess inventory and fragmented vendor payments, restricting growth flexibility.

Approach

The engagement was structured to improve both cost structure and cash flow, with parallel tracks across production efficiency, procurement optimization, and working capital discipline.

1. Throughput & Yield Optimization

• Deployed a raw material consumption minimization framework, including supplier evaluation and incoming quality checks to reduce material wastage.

• Conducted time-motion studies and storage reconfiguration to reduce production bottlenecks and improve line balancing.

• Rolled out preventive and condition-based maintenance programs using FMEA and critical spares stocking to reduce unplanned downtime.

  
  

2. Procurement Cost Reduction

• Benchmarked raw material prices with industry indices to improve negotiation leverage.

• Identified and developed alternate vendors, improving competition and ensuring continuity.

• Negotiated long-term rate contracts, creating cost visibility and locking in favorable pricing.

  
  

3. Working Capital Efficiency

• Defined safety stock and reorder levels to systematically reduce excess inventory.

• Conducted 5S implementation and weekly inventory reviews to institutionalize planning discipline.

• Standardized and benchmarked vendor payment terms, moving to weekly runs to improve cash flow predictability and reduce transactional friction.s.

Results

• 8% Gross Margin Improvement through raw material savings, throughput gains, and procurement discipline

• 15% Working Capital Reduction via inventory optimization and payment term standardization

  
  

Conclusion

For asset-heavy manufacturers, operating leverage is unlocked not only through cost savings but by tightening the flow of material, capital, and decision-making. This engagement helped the client build a leaner and more resilient cost structure while freeing up working capital to fund growth.