Page 45 - The McKinsey Mind

01 (001-030B) chapter 01 1/29/02 4:48 PM Page 23

Framing the Problem 23

sure your suppliers to lower your raw-materials costs. (2) You
could cut the workforce at your thrum-mat manufacturing facili-
ties while maintaining production levels. (3) You might reduce the
time that the thrum-mats spend in the curing process, thereby
increasing throughput. Now you are going to put each option to
the QDT.
Pressuring your suppliers would be great, but can it be done?
What needs to be true for that option to work? Well, you might
say, raw materials should be a significant factor in total thrum-mat
cost; otherwise, reducing the cost of raw materials wouldn’t make
much difference in the total marginal cost of a finished thrum-mat.
As it happens, one of your team knows that raw thrums make up
about 35 percent of the total cost of a thrum-mat, so there should
be some mileage there. Next, you would need to have some pricing
leverage with your suppliers. Unfortunately, on page A2 of this
morning’s Wall Street Journal, there is a story about the newly
announced takeover of General Thrums by Allied Thrums and
Bezels. Analysts expect the merger to result in a significant reduc-
tion in total thrum production capacity, with corresponding
upward pressure on wholesale thrum prices. So much for that idea.
What about reducing manufacturing head count? Labor is a
large component of the total cost of thrum-mat production, so that
would seem a fruitful area for exploration. The key question then
is whether Acme’s production facilities are overstaffed. One way to
determine this is by learning whether Acme’s per-worker produc-
tivity is low relative to the industry. You recall seeing the results
of a recent benchmarking study on thrum-mat production. That
study put Acme significantly ahead of its competitors in per-
worker output. Another dead end.
That leaves reducing the time that thrum-mats spend in the
curing process. Traditionally, Class A thrum-mats spend at least
two weeks in the curing locker—an expensive proposition that not