A service-led equipment business, a volume plant and a process asset do not earn margin from the same decisions. Our view is that programmes built around a single industrial cost benchmark risk cutting the capabilities that earn the return. This page is for CEOs, CFOs and boards deciding where to commit capital, reset a footprint or recover margin.
Margin comes from equipment mix, service attachment and the lifetime cost of keeping the installed base working.
Margin comes from contribution per constrained production hour, schedule stability and the cost of product complexity.
Margin comes from yield, energy and feedstock spread, asset availability and the economics of shutdowns.
Margin comes from equipment mix, service attachment and the lifetime cost of keeping the installed base working.
Equipment sales add assets that may require parts, maintenance and upgrades for years. When service contracts sit outside the original sales decision, equipment discounts and service obligations can be approved against different profit models.
Assess each equipment offer against lifetime contribution, including warranty exposure and the service capacity it consumes.
Customer-specific variants create engineering, spare-parts and documentation obligations after the initial order. Revenue by product does not reveal those obligations unless engineering effort and lifetime support are assigned to the contract.
Set explicit boundaries for customisation and make exceptions carry their engineering and support cost.
For the board
Use common demand and input-cost scenarios to compare investments, then assign operating measures specific to each business.
Explore shared decisions ↓Margin comes from contribution per constrained production hour, schedule stability and the cost of product complexity.
Production targets expressed in units or hours can favour long runs of low-contribution products. Bottleneck capacity is then occupied without testing what each order contributes after material, conversion and fulfilment costs.
Allocate constrained capacity against contribution and delivery commitments, rather than the volume target alone.
A site decision changes freight, inventory buffers, validation work and service risk as well as factory cost. Counting the destination’s unit cost before pricing the transition can overstate the value available to fund it.
Approve footprint changes against a cash-funded transfer plan with explicit quality and customer-release gates.
Margin comes from yield, energy and feedstock spread, asset availability and the economics of shutdowns.
Feedstock and energy purchases, customer pricing formulas and contract resets need not move together. A favourable product spread at a quoted market price can conceal a cash squeeze in the actual purchase and sales books.
Manage the contracted spread and reset calendar before committing production or pricing a new customer agreement.
Running an asset harder can increase maintenance exposure, off-spec output and energy use. A production target that omits those effects cannot settle the choice between another run and a planned shutdown.
Make shutdown and maintenance decisions against campaign economics, including restart risk and the cost of lost availability.
Industrials · Growth & Commercial · Strategic Decisions
Global rolling stock manufacturer
Industrials · Operating Model · Strategic Decisions · Cost Out
European medical device manufacturer