LEGACY PRODUCT ACQUISITION: Pumps and Motors Product Line
Background
- OE supplier had a product line in the “decline” stage of its lifecycle as it brought a replacement product to market
- Contractually obligated to provide service requirements 10-plus years after peak production demand
Changes in Market Dynamics
- Annual product sales decreased from $40mm at its peak to $3.5mm limited production and service level demand
- Some customers not ready/willing to upgrade to new product line, resulting in a long tail of service/ replacement business
Program Economics
- Manufacturer losing money on the product
- Poor handle on true costs (original allocations no longer relevant)
- Reduced economies of scale
- Heavy customer leverage in other products made it difficult to raise prices
QCC Solution
- QCC acquired the product line, including intellectual property, inventory and fixed assets
- QCC lowered costs by optimizing manufacturing processes and supply chain management around the smaller volumes
- Manufacturer’s resources and floor space were freed up to focus on design and conversion to new product line, improving ROI