Reducing costs and improving profitability in depressed markets.
Chemring Group plc designs and manufactures electronics, energetic material products, and countermeasures. Its products satisfy highly demanding technical requirements for customers in defence, security and safety markets. But the end of intensive military operations in Iraq and Afghanistan led to a dip in the order book, making it necessary for the business to review its organisation and costs.
The new chief executive wanted to rebalance the organisation so that more effort and cost were devoted to core activities and less to support. The aim was to create a more streamlined business which is better able to maintain profitability despite the drop in turnover.
Collinson Grant carried out a number of projects both for Chemring Group and for individual business units. The work began with a review of the efficiency and effectiveness of the head office, and the International, European and North American divisions.
The result of the project was the consolidation of all activities currently done in the divisions into a single integrated organisation providing all the functional support needed to facilitate effective performance by the Strategic Business Units (SBUs). We found potential savings of up to £5m, of which more than £3m came from reducing headcount. The project provided a catalyst for more change in how the SBUs should be managed and for more work on operational improvement. The new SBUs were created by ‘clustering’ subsidiaries which previously operated independently. Our consultants drew up a comprehensive, seven-part Business Integration Framework to guide senior managers of the subsidiaries through this process.
Chemring Countermeasures UK, based in Salisbury, was facing a sharp fall in orders from its biggest customer, the UK’s Ministry of Defence. We carried out a review of nearly 300 employees which found opportunities:
- to make savings by removing a layer of managers
- to overhaul sales and marketing
- to manage for profit based on the expected size of the business.
We also reviewed the operations of Roke Manor Research Limited, a subsidiary which employs more than 300 highly qualified engineers who research and develop advanced sensors, communications systems, and network solutions for UK and international manufacturers.
Collinson Grant carried out a review which found opportunities:
- to refocus staff from support activities to core activities
- to eliminate some support activities
- to transfer some of the freed capacity into core and improvement activities.
Our reviews found opportunities to change the structure and operations of Chemring’s head office and subsidiaries. The end result was an organisation which puts more effort into core activities that contribute to sales and profit and less into support functions, helping to make good a pledge to the financial markets to reduce operating costs by £20m. This is an essential prerequisite in reshaping the business to maintain earnings in the face of falling turnover.
Mark Papworth, Chief Executive Officer of Chemring Group, said:
“Collinson Grant’s approach combined rigour with pace, producing a set of recommendations which were quickly adopted and executed. Collinson Grant completed a series of reviews, which many managers found very challenging. Their consultants’ professionalism earned much respect throughout the businesses.”