The aerospace sector faces a number of requirements and constraints:

• The trend towards reduced operating costs, causing maintenance contracts to become increasingly complex (contracts based on flight time or number of cycles, integrated or non-integrated inventory management, variable number of exclusions)
• Increasing pressure to renew fleets with the latest generation of more fuel-efficient aircraft
• Introduction of new technologies that are changing the balance of power between suppliers

The short-term challenge for the industry remains the effective implementation of complex production systems:

• Steering: control of all critical parameters, optimising performance/productivity
• Supply chain: business continuity, minimising inventory costs and intermediaries
• Production system: interfaces with partners, including new low-cost airlines (Northern Africa, Eastern Europe, Far East) and the sharing of standards, tools and best practices

In the longer term, the growing determination of Original Equipment Manufacturers to capture value downstream by offering services and maintenance can profoundly alter the value chain. For instance, Maintenance Repair and Operations companies need to prepare their response by aiming to reach critical mass, improving their cost position and capitalising on their independence and expertise. Meanwhile, Original Equipment Suppliers need to protect their negotiating power by packaging their own offers to end clients.

For several years automobile manufacturers and equipment suppliers (OEM and OES) have been confronted with a “scissor effect” that systematically puts pressure on their margins, with:

• Structural over-capacity, particularly in mature economies
• Increasingly strict environmental constraints
• Enhanced customer expectations, calling for more equipment and greater personalisation without an increase in price

The 2008/2009 crisis only exacerbated these constraints.To meet these challenges, OEM’s and OES’ will have to:

• Continue a vertical de-integration strategy; with OEM’s focusing their efforts on shared platforms and modular assembly, and OES’ planning to reach critical mass in key technologies through acquisitions or mergers
• Implement innovative strategies by developing new offers (electric or hybrid cars), new business models (sale of mobility solutions, rental/sale of electric car chargers, car-sharing services), and personalised services
• Enhance their top line by offering innovative marketing solutions, for example through brand differentiation

Since the volume and profitability crisis, the chemicals industry has experienced an unexpected rebound driven by the streamlining of capacity in Europe and the US combined with very strong demand from emerging economies

Nevertheless, each segment is struggling with its own unique challenges in Europe, including:

• Petrochemicals: restructuring and cost-cutting, due to the lower competitiveness of crackers
• Organic chemistry: stable overall, with increasingly refined energy management and growth opportunities in environmental sectors
• Polymers and performance materials: gradual penetration of “green chemicals” and the expected rapid expansion of China (now a net importer of many polymers)
• Intermediaries in pharmaceuticals, cosmetics and food: gradual penetration of “green chemicals” and the end of relocations to low-cost countries for small volume

Incremental revenue/cost improvements, often initiated by key players, have become obsolete in the industry, with real breakthrough strategies required to gain and maintain market leadership:

• Definition and execution of external growth strategies in Europe: The reconfiguration of European footprints and increased development in Asian and Latin American markets. The segmentation / streamlining of product portfolio and services, with resources reallocated to more attractive markets from a strategic, commercial and industrial standpoint
• Innovation and product/technology development: A clear and strong position on sustainable development focused on reduced energy consumption/emissions and resource preservation
• Differentiation through customer service: The identification of real customer needs and development of internal plans to meet those needs, leading to the creation of breakthrough offers (quality, delivery times, costs) that add value across the entire value chain (suppliers, customers, customers of customers)
• Operational excellence: Systematic and structured initiatives across all levers to achieve the standards and best practices of ultra-competitive industries (e.g. automotive, electronics)

Traditional retail business models are being put to the test by downward pressure on prices, accelerating promotional activity, and increases in operating costs. The rapid emergence and development of new channels and operating models is changing consumption patterns and consumer behaviour more than ever before.

Winning retailers are the ones capable of differentiating their concept and bringing agility and relevance to their sales strategy:

• Rethinking range and category definitions
• Ensuring operational excellence: range structure, pricing policy, supply chain, etc.
• Innovating the customer experience through proactive sales and cross channel strategies

E-commerce is continuing to expand at an astounding double-digit rate. Once considered a “sideline” or even a competitive sales channel, online is now a key pillar of any retailer’s strategy:

• Product range strategy: size, renewal, role of online / offline range
• Price strategy: customer consistency, price image, margin protection
• Customer experience: relevant touchpoints, consistent messaging, seamless journey
• Website efficiency: traffic generation, TTR, customer experience, average basket
• Growth strategy/vision: leveraging owned data to create real value through analytics
• Operational model: evolution of supply chains and the impact of evolving logistic systems on stores

Advancy advises retailers around the world in strategic projects:

• Overhaul of business models and strategy
• Definition and roll-out of new concepts
• Excellence in category management (pricing, ranging, sales drive, merchandising)
• Operational excellence (stores, supply chain, organisation)
• International expansion

The European energy scene is undergoing radical and irreversible changes at an accelerated pace, undermining energy providers’ conventional economic models and requiring them to adapt to the new reality.

The sector faces a wide variety of challenges:

• Booming renewable energies with higher “merit order” ranks than conventional sources
• Shale gas, a revolution in the US natural gas market that directly impacts European economics
• Energy transition, leading to increases in energy efficiency
• Increased competition in deregulated energy markets
• Emergence of new disruptive innovations (g. energy storage), new economic models (e.g. Demand Side Management) and new digital capabilities

Despite significant imbalance among energy providers, all will have to manage major strategic turnarounds, critical for their futures, and provide clear answers to the emerging strategic issues.

Against this backdrop, sector players must:

• Optimise energetic asset portfolios in the short, medium and long-term
• Develop new and differentiating value proposals
• Design and implement a digital strategy for infrastructure and Marketing & Sales
• Exploit the full potential of business integration synergies (energy distribution, services)
• Maximise innovation efforts and position themselves to anticipate technological trends and breakthroughs

Advancy supports its clients on a long-term basis to enhance their understanding of those stakes and challenges.

Fast Moving Consumer Goods companies are facing a new generation of challenges.

After years of focusing on costs, the development of new forms of customer interaction and the acceleration of emerging markets offer new pockets of growth:

• Expansion of product lines in high-growth countries
• “Route to market” in emerging countries
• Use of new channels to accelerate growth and enhance affinity with the brands

Despite fierce price competition, driven by the development of wider private label ranges by retailers and an increased focus on low prices, companies are still required to maintain the same level of operations and close attention to cost structures:

• Stay focused on the core business
• Restructure production capabilities
• Secure and effectively manage supply chain

To gain and maintain market leadership, major FMCG companies must:

• Develop strategies for entry into high-growth countries
• Explore opportunities for new products and optimise the brand portfolio
• Redesign process innovations
• Optimise marketing effectiveness, commercial animation and digital channels
• Demonstrate operational excellence (sales force, supply chain, industry)

After a period of explosive growth around 2000, technology players are now experiencing a new type of development. Today, competition is more intense, fuelled by new technologies (e.g. WLAN versus UMTS), new products, the emergence of new players (China) and different business models (e.g. fabless companies).

How can players in the electronics space maintain their leadership?

• A smart product portfolio de-proliferation strategy and low complexity cost structure can keep a player’s cost/quality position above that of the competition
• Adjusting response times to fast-changing client and market expectations
• – Short manufacturing cycles and high-performance supply chains
• – Optimised development cycles
• – Effective management of client relationships to better meet client needs and achieve solid price positioning
• The choice of business model (core business versus make-or-buy, global footprint) must effectively counter the “commoditisation” of the company’s products and secure its position in the value chain. Players must be able to maintain their margins by capitalising on a robust management of patents and recurring revenues (e.g. content, subscriptions, accessories, consumables)

Major hospitality groups around the world boast strong growth potential, despite the challenging environment that plagued the sector in 2009 and 2010. In Europe, consolidation is underway, whilst in emerging economies like China, Brazil and India, hospitality chains are just beginning to grow and still hold large potential.

Hospitality groups must simultaneously juggle five different functions:

• Marketing: properly positioning their customer-oriented offer and maintaining worldwide recognition
• Sales and Distribution: management of online and offline sales channels (both self-operated and distributed) as well as pricing
• Operations: operations and cost management
• Human Resources: hiring and maintaining the right people
• Financing: implementing the right business model capable of maximising growth with the judicious use of the capital markets

Advancy advises hospitality groups on strategic projects such as:

• External growth, through consolidation and acquisitions
• Internal network development to reach critical mass
• Development of new marketing concepts
• Improvement of occupancy and profitability through sales efficiency, yield management and international distribution agreements
• Structural efficiency and cost optimisation

Advancy also has an extensive understanding of issues affecting restaurant chains:

• Offer alignment with customer tastes and needs
• Optimisation of pricing strategy
• Network development

Though undermined by the financial crisis, the luxury goods sector has nevertheless been sustained by several growth reservoirs, including new emerging markets such as Brazil, growth in China (albeit recently subdued) and recovery in Japan.

At the same time, luxury brands are faced with new challenges:

• Satisfying new client profiles as they become more connected, more fickle, and use a variety of sales channels (online, mobile, social media etc.)
• Developing distribution channels with the right economic equation (location, format, categories, prices) to provide end-to-end management of the customer experience and capture maximum value
• Meeting growing demand while maintaining control over product quality by securing raw materials (e.g. precious stones, pelts) and developing a competitive advantage through exclusive expertise
• Managing the supply chain to provide optimal customer service given the shift in demand towards emerging countries, and maximising the contribution of production capacities

Advancy advises major luxury goods companies on these strategic projects:

• Developing an exceptional and tailored customer experience globally
• Managing expansion/growth, country priorities and formats (self-operated stores, franchises, etc.)
• Route-to-market in emerging economies
• Securing the supply chain and developing key areas of expertise, including via vertical integration
• Enhancing the operational performance of the supply chain

A large range of building materials are used in construction and public works, including steel, aluminium, glass, plastics and materials from the processing of quarry products, making the industry complex.

This sector is undergoing profound changes:

• Unprecedented growth of emerging markets that are undergoing rapid urbanisation
• Increasing awareness of environmental issues and new methods of construction
• Pressure on prices due to commodity costs
• Strong dependence on construction and real estate cycles

To consolidate their leadership, companies in the sector must:

• Identify and take advantage of the best growth opportunities in the market, be that through organic growth, acquisitions, partnerships, alliances etc.
• Refine their market positioning (segmentation, new products, price positioning/steering, enhanced services), distribution (route-to-market, new channels, new models – specialist/generalist) and sales focus (sales plan, KAM)
• Optimise industrial network performance

STEEL:

The European iron and steel industry has yet to return utilisation rates back to pre-crisis levels, with challenging market conditions expected to prevail in the coming years:

• Continuous fluctuation in commodities, dominated by global momentum
• Risk of excess capacities in China if demand slows

New strategies must be developed to sustainably create value:

• Client value: innovation, short supply chain, local services, etc
• Asset reconfiguration: new technologies, energy efficiency and organisational efficiency
• Upstream integration
• Allocation of investments: effectiveness of maintenance investments in mature regions and growth in emerging sectors

ALUMINIUM

The aluminium sector has changed enormously over the past decade:

• Driven by China, capacities have doubled, placing traditional Western manufacturers at a disadvantage
• Ongoing divestment of major downstream transformation companies
• Exhaustion of competitive energy resources
• Challenge of composite materials in the aerospace industry, i.e. the traditional user of high value-added aluminium

Successful companies will be able to create value by capitalising on the many opportunities that may present themselves in the coming years:

• In emerging economies: new generation of low-cost electrolysis, paving the way for targeted growth investments in emerging energy-rich geographic regions
• In mature economies:

– Continued cost-reduction efforts, which are increasingly difficult to achieve

– Innovation and development of new aluminium solutions: transport, construction, packaging etc.

MINING, METALS & MINERALS

Ultimately, the leaders of these industries must focus their efforts on:

• Organic growth opportunities and acquisitions
• Technological innovation (increasing the value of extracted minerals)
• Operational performance: capex management, purchasing/procurement, SG&A, supply chain, pricing policy, sales efficiency

Historically integrated industry players are facing extensive changes and new challenges:

• Decline in activity on historical markets (widespread decrease in paper consumption due to dematerialisation) and growth in new regions of consumption (BRIC, emerging economies)
• Tougher environmental constraints in all manufacturing phases (forestry, pulp production, printing, distribution)
• Heightened pressure on costs and eroded margins given increased commodities and energy prices

To reinforce their leadership, paper and pulp companies must:

• Expand to new markets and anticipate the advent of new rivals
• Control the entire production chain, including distribution, to meet new demand (e.g. management of recovery/recycling)
• Innovate to offer high value-added paper products and provide clients with a real service offering (e.g. green services), rather than offering mere commodities
• Maintain competitiveness by keeping costs under control and achieving operational efficiency, while anticipating new environmental constraints

Despite growth in volumes, driven by higher life expectancy and the development of emerging economies, health insurance deficits and the expansion of generic drugs have put pressure on the operating margins of pharmaceutical companies.

Pharmaceutical companies now must deal with lower selling prices, especially on their blockbuster drugs, coupled with increased costs linked to growing investments in R&D.

To better meet these new challenges, industry leaders are stepping up their consolidation efforts:

• Pooling of R&D resources by major pharmaceutical groups
• Accelerated race to file patents, with the development of new drugs to rebuild a portfolio of patented products
• Major cost restructuring efforts, particularly through improvements in sales force efficiency

These trends are expected to continue:

• Through persistent vigilance on costs, for example by developing new information technologies used by practitioners
• Through acquisitions of medium-size pharmaceutical companies in order to gain new patents or increase presence in emerging markets

For more than a decade, Advancy has developed extensive expertise in addressing the issues most important to investors, helping our clients realise strong returns. We have completed hundreds of engagements for leading mid-market and large-cap private equity funds in Europe and Australasia along all stages of their investment cycle:

• Strategic Due Diligence: assessing market attractiveness, competitive landscape (and positioning of the target therein), strategy, organisation, operations and forecasts
• Vendor Due Diligence: strategic planning, opportunity identification and sales process support
• Post-merger Integration: developing and ensuring synergies and profit growth plans are on track
• Portfolio Management: performance improvement of portfolio companies (growth strategies, operational efficiency, commercial strategies etc.) and acquisition support from screening to integration

Our due diligence approach aims to thoroughly and objectively test the investment thesis whilst uncovering areas of risk and opportunity. We usually combine internal and external interviews with an in-depth analysis of key drivers and modelling of the target’s value creation potential.

Our skills rely on leveraging senior industry expertise to work effectively with our private equity client and, when the process allows, with the management of the target company. It is not uncommon for a due diligence to include 50 to 100 interviews of customers, suppliers, industry experts, local and global competitors, as well as several working sessions with management and our client’s investment team.

Tourism players are being forced to adjust their economic model to accommodate extensive changes in the sector:

• Increasing use of online distribution channels
• Shortage in resources and capital
• Increasing industry polarisation towards the low cost and luxury segments
• International competition exacerbated by geopolitical tensions
• Changes in consumer behaviour (last-minute purchases, growth of short holidays, etc.).

Advancy advises tourism groups on strategic projects such as:

• Proactive business modelling to anticipate future changes
• Redefinition of the distribution strategy
• Improved profitability through enhanced cost competitiveness and/or development of new products
• Mergers and acquisitions
• Operational excellence

International business is rapidly changing, with trends towards globalisation, integrated logistics and more powerful information & communication technologies reshaping the traditional methods of global trade.

The rapid growth of e-commerce is driving up demand for transport, and logistics expertise is fast-becoming a key source of competitive advantage for major corporations.

The sector is currently influenced by major dynamics:

• Increased industry consolidation aimed at attaining economies of scale
• Logistic service providers offering value added services and expanding their range, both upstream and downstream in the value chain, to differentiate from competitors.
• A growing number of players are entering into partnerships to take up a position in transport and flow management when they cannot expand their own fleet
• Regulatory pressure geared toward reducing greenhouse gas emissions and controlling urban pollution

Assisting our clients in their strategic choices is part of Advancy’s core business:

• Growth strategy: determining and implementing profitable growth scenarios
• Turnaround strategy: defining breakthrough recovery scenarios for struggling businesses potentially marked for disposal
• Portfolio strategy: determining the most profitable options in terms of positioning, identifying assets for disposal, disposal value and potential buyers
• “Make or buy”: defining the best strategy for support functions (in-house, subcontracting, joint venture, spin-off)
• Business model: finding the most suitable cost strategy
• Strategic oversight: defining and implementing key KPIs to track performance

Our advice is based on an analysis of a client’s options, quantification of the issues involved, definition of major scenarios and management buy-in.

Delivering on our promise of “strategic advice that works”, Advancy supports its clients in the implementation of their strategies until clear results are visible on the bottom line.

We assist investment funds and corporations in all commercial facets of external growth and divestment:

• Strategic Due Diligence: market attractiveness, competitive landscape (and positioning of the target therein), sustainability of earnings, strategy, organisation and operations
• Vendor Due Diligence: strategic planning, opportunity identification, and sales process support
• Portfolio Management: performance improvement of portfolio companies (growth strategies, operational effectiveness, commercial strategies etc.) and acquisition support from screening to integration
• Post-merger Integration: developing and ensuring synergies and profit growth plans are on track

Organisations have often developed over several years, with a legacy of numerous management teams. However, long-term success requires constant rethinking and adapting. Organisational structures are often stressed when companies acquire or merge with other companies. Change requires a period of thinking, strategy and anticipation of all events that the company will face.

A good organisation must meet several challenges:

• Balance organisation structure to reduce complexity and facilitate coordinated execution
• Design functions around value creation rather than reporting lines
• Manage and realise the full benefits of scarce resources through recruitment, skills development and recognition of current and future leaders
• Create a strong culture to facilitate innovation, change and excellence

Advancy has been engaged in several organisational projects, from high-level assessments of the organisational structure to detailed discussions with key stakeholders at all layers in the organisation.

The strategic results tend to be medium to long-term, but we often see immediate cost reductions by introducing more efficient structures.

Advancy has strong expertise in commercial strategy and efficiency, including experience in:

• Pricing strategy: product segmentation by client, positioning versus competitors by type of distribution, pricing policy, processes and support tools
• Brand strategies: strategic diagnostics, action plans, customer experience and business plans
• Marketing insights: market potential, competitive benchmarking and consumer insights
• Product mix optimisation: product portfolio reviews, channel strategy and route-to-market
• Marketing organisation: mission, profile, goals and performance tracking (KPIs)

To maximise results, one’s commercial strategy must remain consistent with their marketing strategy. This is achievable through a clear definition of the distribution strategy, consistent commercial organisation and strong management of key accounts & the field sales force.

During the boom times companies have focused on revenue growth, with optimisation flying under the radar. Advancy have a proven track record of working with clients in creating cost reduction schemes that can be more effective than revenue growth strategies.

Most importantly, we have found that an effective cost optimisation project can improve your business’s internal and external service levels by simplifying and refining existing processes.

Three major trends will amplify the focus on operations:

• Increased competitive pressure: globalisation has led to the introduction of new low-cost players and market entrants who are using strong operational levers to differentiate themselves (e.g. new value chains, outsourcing and offshoring)
• Increased customer expectations: The balance of power has reversed, with customers becoming increasingly sophisticated given their greater access to information and the ability to instantly compare offerings in today’s more transparent business environment.
• Increased service offerings: Across many industries, both B2B and B2C, customers are expecting products to be accompanied by a ‘package’ of customised services that improve the customer experience and differentiate a business’s offering from the competition.

Advancy helps industry leaders to push the boundaries of operational excellence across the whole value chain. We have particularly strong experience in lean manufacturing, innovation & product development, purchasing, production & maintenance, capital committed and SG&A.

Our tried and tested methodology is personalised to meet two challenges:

• Aligning operations with strategic decisions
• Making real changes that lead to continual improvements and deliver sustainable profit levels throughout the entire organisation

It is here that our motto “Driving Strategy to Results” fulfils its promise.

Organisations must increasingly rely on effective supply chains to maintain or improve their performance. Whether driven by the need to reduce costs or increase service levels, organisations often target the same objective; delivering products to customers in a faster, smarter and cheaper way than competitors.

Supply chain excellence cannot be achieved without answering a number of questions:

• Is our supply chain in line with our business strategy?
• Do we have the optimal network configuration to serve our customers efficiently?
• What level of outsourcing would be optimal for us both from a financial and risk management perspective?
• How could we lower our inventory levels and still better meet demand?

Advancy has developed the expertise to optimise end-to-end supply chains with extensive experience in areas such as inventory management, planning & forecasting, distribution networks, freight, route-to-market and warehouse management.

Beyond supply chain strategy and redesign, Advancy supports all aspects of implementation by delivering detailed action plans, taking part in negotiations with third parties and helping track initiative savings.

Advancy has completed several supply chain engagements leading to quick and tangible results: timelines cut in half (packaging), +20 points in IRD (steel), finished-product inventories reduced by 40% (aluminium), delivery in full on time (DIFOT) improved by 25ppt (FMCG), customer turned sole supplier (automobile OES), warehouse space reduced by 40% (FMCG).