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The client has not yet started production of handbags because of profitability issues. The company would operate at a margin near zero which is not sufficient to sustainably compete in the industry. Profitability analyses of operations and potentials for optimization. The goal is making production financially feasible.
Performing a value chain analysis to identify the cost drivers of each activity within the company Identifying and prioritizing the activities with the highest impact potential Developing ideas for cutting costs
Results: The biggest cost driver are production costs, more precise labor costs. The material used is difficult to process leading to high labor per unit. As a solution, we have identified alternative materials and thought of relocating production somewhere less expensive.
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