Operational Centralization
Structural adjustments to a manufacturing footprint involve merging multiple production sites into a single, larger facility to achieve economies of scale. Executing a factory consolidation allows a firm to reduce redundant overhead costs while streamlining its management hierarchy. Fixed expenses for security, utilities, insurance and maintenance are spread across a higher total output.
Infrastructure Rationalization
Logistics benefits accrue when a company moves its production closer to major transport hubs or major raw material suppliers. Managing one large warehouse instead of several smaller ones reduces inventory holding costs and simplifies the coordination of outbound freight. The process requires a detailed transition plan to ensure that customer orders are filled while machinery is being dismantled and reinstalled at the new location.
Personnel from the closing sites are often offered relocation packages or redundancy settlements depending on the labor laws in that region. Total investment for such a project includes the cost of new property, equipment transport and the integration of digital tracking systems.
Capacity Realignment
Supply chain resilience might be tested if the consolidated site faces a local disruption like a power outage or a labor strike. Risk managers typically maintain a secondary source of supply to prevent a total stoppage in the event of a facility failure.
