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BCG Medium Profitability Operations Optimization

Packaging Co.

#Manufacturing
ProHub Comment

This case effectively demonstrates how operational consolidation decisions require comprehensive cost analysis beyond just unit economics. The counterintuitive finding that consolidation increases total costs—despite reducing per-unit cutting costs—highlights the importance of analyzing all cost levers, particularly distribution and logistics. The case also emphasizes that financial metrics alone should not drive strategic decisions, as qualitative benefits like resilience and responsiveness add significant value.

Estimated Time 15 minutes
Difficulty Medium
Source Wharton
50 / 100
The client is a US subsidiary of a packaging and shipment firm (e.g., Amcor, Sealed Air, etc.). They want to evaluate whether they should consolidate their package production operations, which currently are located at two separate plants. You have been asked to help them evaluate whether this is a good idea and, if so, which plant they should close.

Clarifying Information

  1. Objective - Evaluate if the plant consolidation makes sense and which plant can be closed
  2. Current plants are in New Jersey and Idaho
  3. Both plants have identical capacity and would be able to handle all required package production volume
  4. Material costs are identical for the two plants
  5. Package production costs are currently identical; however, larger plants are more efficient than smaller – doubling capacity reduces cutting costs and impacts distribution costs too
  6. Delivery of the packages is done by a national trucking company that takes the packages from both plants to distribution centers — costs would change if the plants were consolidated