Case Study 02

Cost benchmarking study confirms decision to divest

Situation

The client manufactures truck and automotive components. One of their units produces suspension components based on a design concept that is rapidly being displaced by an alternative approach. While this mature product category may never disappear entirely, the downward pressure is exacerbated by the presumably superior cost structure of a Mexican competitor.

Outcome

Clarity was engaged to develop a detailed cost benchmarking study comparing its own operations against the Mexican competitor. By developing estimates for the key contributors to cost, including labor, materials, and utilities, Clarity was able to develop a reasonably accurate picture of the severity of the client's cost structure disadvantage. Based on this input and the broader market factors, the client elected to divest the unit.