The Situation
Leadership had a general sense of product profitability based on raw material and basic labor costs. But setup time, changeover time, labor gaps between processes, machine breakdowns, delivery slips, and capacity constraints were invisible. On margins as thin as contract manufacturing demands, even a 5% cost miss can turn a profitable product into a loss. Outsourcing decisions were made on instinct rather than full-cost comparison. The company had no way to know whether it was cheaper to produce in-house or send work out.
What CEI did
Partnered with operations to map the full production lifecycle: setup, changeover, idle time, planned maintenance, unplanned breakdowns, and labor gaps between process steps.
Built a complete capacity model quantifying actual machine utilization, labor productivity, and throughput by product line.
Calculated true fully-loaded cost of production per product, including overhead allocation previously excluded from margin analysis.
Identified which products were profitable in-house versus which should be outsourced based on full-cost economics.
Restructured production scheduling to prioritize high-margin products and fill remaining capacity with lower-margin work.
+3%
Gross Profit Margin Improvement
Full Visibility
True Cost Per Product Line
Data - Driven
Outsource vs. In-House Decisions
On a $100M+ revenue base, a 3% gross margin improvement represents millions in recovered profitability. Production scheduling now prioritizes the most profitable products first, and outsourcing decisions are backed by real cost data instead of assumptions.
In Their Words
“We thought we understood our costs. We were costing on raw materials and run time and calling it good. Once we saw the full picture — the idle time, the changeovers, the gaps — we realized we were
making decisions with half the information.”
— VP of Operations | Confidential Client