Arguments for Site Consolidation

One argument in favor of merging sites is the possible merging of administrative tasks, accompanied by a reduction in overhead jobs. However, this possibility also exists in many operational functions without merging the production sites. For example, functions such as purchasing, personnel management, controlling and financial accounting can be performed centrally.

Site consolidation can also enable operational economies of scale. This can be the case if the same or similar products are produced at the sites to be merged using the same or similar manufacturing processes. In such cases, more machines bundled at one site can lead to greater flexibility. Machines can run longer “with one format” and the number of changeover operations can be reduced. This increases the proportion of productive time in the total time and also reduces scrap, because with fewer set-up operations there is also less start-up scrap. If the consolidation reveals that machines are redundant, the number of machines in operation can possibly even be reduced. This makes it possible to reduce the total operating area as well as the operating and maintenance costs.

Personnel costs can also be reduced with site consolidation. Presumably, the number of plant managers will decrease. It can be assumed that fewer shift supervisors will be needed. It may also be possible to save jobs in other functions, for example in the precision control production and/or in procurement planning, perhaps also in work preparation and in scheduling, provided that orders can be manufactured in larger production runs as a result of site consolidation. Whether savings should actually be made here, however, must be examined in detail. In many of these functions, the volume of work depends on the number of operations, which is not necessarily reduced by site consolidation. This is usually the case in quality assurance. If, according to specifications, every nth component must be inspected and documented, this will not change as a result of a site consolidation. The same applies to quotation and order processing. If the Group has so far been organized in such a way that quotation and order processing has been carried out on a site-by-site basis, the volume of work will not change as a result of a consolidation. Personnel savings can therefore not really be expected here.

Advantages of merging sites are indeed to be expected in terms of better representation arrangements.

If the sites have been purchasing independently up to now, site consolidation can also result in purchasing price advantages due to larger annual volumes, larger order lot sizes and transport cost advantages. However, many of these advantages can also be achieved without site consolidation by centralizing the purchasing function, if this has not yet been done.

A consolidation should go hand in hand with an optimization of the material flow. As a rule, sites have grown organically, and not all machines are optimally arranged. These inadequacies can naturally be eliminated when a site is redesigned.


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