How a Strategic Overhaul of Distribution and Capacity Utilization Delivered $11M in EBITDA Gains for a Leading Plastics Manufacturer
PlastiCo, a mid-sized plastics manufacturer with a strong presence in the packaging and automotive sectors, faced significant challenges in its supply chain. Despite steady demand for its products, the company was struggling with high operating costs and inefficiencies in its distribution network, leading to underutilized production capacity and declining margins. The company’s existing supply chain processes were outdated, with fragmented logistics management and an overreliance on a limited number of distribution centers, resulting in longer lead times and higher inventory holding costs.
To address these issues, PlastiCo’s leadership recognized the need to optimize their supply chain operations and engaged our team to drive improvements. Our mission was to streamline their distribution network, enhance capacity utilization, and ultimately capture significant operational cost savings to boost EBITDA. The initiative aimed to unlock efficiencies that would not only improve the bottom line but also position PlastiCo for future growth in a competitive industry.
PlastiCo’s supply chain was hampered by several inefficiencies, primarily stemming from an overly complex and rigid distribution network. The company operated with multiple regional warehouses, each running on isolated systems with limited data integration. This lack of visibility and coordination led to suboptimal routing of shipments, resulting in increased transportation costs and longer delivery times. The existing network was not optimized for demand variability, causing frequent stockouts in some regions while excess inventory accumulated in others.
Moreover, PlastiCo’s production facilities were operating at only 70% capacity, despite having the infrastructure to scale output. The root cause of this underutilization was poor synchronization between manufacturing schedules and distribution needs, compounded by inaccurate demand forecasting. These challenges were further exacerbated by fluctuating raw material costs and unreliable supplier lead times, which put additional pressure on PlastiCo’s working capital and eroded profit margins.
Finally, PlastiCo’s supply chain team lacked the necessary tools to perform real-time analytics, making it difficult to optimize decision-making. The absence of a robust supply chain optimization framework limited their ability to identify opportunities for cost savings, capacity improvements, and efficient resource allocation.
"Their expertise in supply chain transformation was invaluable. The results went beyond cost savings, enabling us to better serve our customers while significantly boosting profitability." - COO
To drive meaningful improvements, we applied a structured approach using supply chain optimization methodologies, focusing on Network Redesign, Capacity Utilization Enhancement, and Data-Driven Decision Support.
We began by conducting a Supply Chain Network Optimization Analysis, using advanced modeling tools to simulate different distribution scenarios. By leveraging the Total Cost to Serve (TCS), we evaluated the end-to-end costs associated with transportation, warehousing, and inventory holding. This analysis revealed that consolidating PlastiCo’s regional warehouses into strategically located mega-distribution centers would reduce transportation costs by 15% while improving delivery times. To support this new distribution model, we introduced Dynamic Routing Algorithms that optimized shipment routes in real-time based on customer demand and available capacity. This reduced delivery lead times by 20% and minimized stockouts, improving service levels across key markets.
To address underutilized production capacity, we implemented the Lean Manufacturing Framework to identify and eliminate bottlenecks in PlastiCo’s production processes. We also applied Sales & Operations Planning (S&OP) practices to align production schedules with demand forecasts. By enhancing synchronization between manufacturing and distribution, we improved plant utilization from 70% to 85%, unlocking additional output without requiring capital investments in new facilities. Additionally, we leveraged Advanced Analytics to refine demand forecasting accuracy by 30%, reducing the bullwhip effect and ensuring that production levels matched actual market demand. This allowed PlastiCo to optimize inventory levels, decreasing working capital requirements by 12%.
To sustain improvements, we deployed a Supply Chain Control Tower powered by real-time analytics and dashboards. This tool provided PlastiCo’s supply chain managers with visibility into key performance metrics, such as inventory turnover, transportation costs, and plant capacity. By integrating Machine Learning Models, we enabled predictive analytics for proactive decision-making, reducing the likelihood of stockouts and optimizing supplier lead times. We also conducted a comprehensive Training and Change Management Program for PlastiCo’s supply chain team to ensure they could leverage the new tools and processes effectively. This initiative fostered a culture of continuous improvement, empowering the organization to adapt quickly to market changes.
Our supply chain optimization efforts resulted in a $11 million improvement in operational EBITDA, driven by increased capacity utilization, reduced transportation costs, and optimized inventory levels. By consolidating the distribution network and streamlining logistics, PlastiCo achieved a 15% reduction in transportation expenses and improved delivery reliability, enhancing customer satisfaction.
The improvements in capacity utilization led to a 20% increase in output from existing facilities, allowing PlastiCo to meet rising market demand without additional capital expenditure. The deployment of advanced analytics and the control tower provided real-time insights, reducing inventory holding costs by 10% and enhancing the overall agility of PlastiCo's supply chain operations.
* Our clients' confidentiality is paramount to us. Although their names may have been altered for privacy, the outcomes and results shared are genuine and authentic.
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