Bob Cortese, CPA, CGMA Canadian Controller CTS Corp
Bob Cortese was involved in developing a suite of cost management initiatives at CTS Corp. in Canada. As a result, profits increased, costs were reduced, and efficiencies in supply chain and production were maximised. Here, he shares some of the principles that guided this transformation. [ILLUSTRATION OMITTED] In my 30-year career in finance, IT, and supply chain, I have worked in various sectors, including aerospace, industrial waste disposal and recycling, electronics, and a stint at the US Department of Defense. I qualified with CIMA in 2010, and this provided me with the insight into what was occurring around me that I was not seeing--it gave me a holistic approach. The pieces came together, and a vision of what was possible and how to get there became much clearer. My most recent role as controller for CTS Corp., a global designer and manufacturer of sensors, actuators, and electronic components, presented an amazing opportunity to combine the experience I had gained over the years and contribute to a significant overhaul in the way the company carried out its business. Maximise capacity, minimise duplication CTS had assembly lines for three major products. We found that there were also other capabilities in the plant, but over time certain functions had been outsourced to external suppliers. When we took a closer look at our capabilities and the issues we were dealing with in relying on external suppliers, we developed a costs model to start repatriating components. It's not that our supply base was ineffective; we had just grown complacent and accepted the status quo. It was time to rethink why we were in business. Over the next 18 months, we brought back every component (over 50) and created a very robust stamping and moulding capability. We changed the culture of the organisation and improved our profit margins by 4%-5% overall. As a knock-on benefit, we had almost zero waste, the quality of our product improved, we were better able to control our inventory and use of manpower, scheduling became more efficient, and we were able to build better relationships with the smaller number of suppliers that we still needed. Streamline the supply chain When looking to bring down costs, a key area that can benefit from extra scrutiny is your supply-chain management. It's not enough to simply seek out the lowest-cost suppliers. We built a supply-chain team to oversee the entire process from customer order, through operations and maintenance, down to the supply base. We invested time in creating strict internal processes. We implemented a new reporting format for use across all production lines, so that they were each using the same decision-making criteria. We developed relationships with our suppliers, often meeting face to face, which allowed us to understand their issues, frustrations, lot-sizing strategies, lead times, processes, and culture. We started to use a 52-week forecast to let our suppliers know what we would be ordering over the course of a year. This helped with their scheduling and made them more comfortable dealing with us, which in turn strengthened our negotiating position. By creating a cross-functional supply-chain team, we eliminated so many hand-offs, that at times it felt as if issues and decisions were addressed in seconds rather than taking days and multiple emails. It took approximately 18 months for this new system to become our working norm, but it was such a success that it was soon adopted by the company in other locations as well. Engage your workforce You can't just demand a 10% reduction in spending, for example, and expect your staff to magically achieve it. You need to have the leadership of experienced leaders who have the respect of the employees, can create a vision, and are able to leverage the people, technology, and processes involved to realise that goal. To link up the leadership with the workforce, we devised an innovative programme, Quick Kaizen, to encourage a "we" culture and facilitate constant communication among staff at all levels. …