As a Group, TR is committed to continuous improvement. We are always looking for ways to make our processes more efficient, whether that is by improving our manufacturing capacity and utilisation, working with our vendor base to manage costs, increasing our available warehousing space or improving our management and business information systems. We understand the importance of an efficient and effective cost structure, so as to best future proof the business and to support our strategy for growth.
Performance so far
Since 2010, our gross profit margin has increased by 530bps, our underlying operating margin by 920bps and our overheads as a percentage of sales has fallen from 23.5% in 2010 to 19.5% in 2016. In the last 12 months, we have specifically focused our efforts in a number of areas to achieve an improved underlying operating margin of 10.4% (2015: 9.9%).
'Lean-Lift' technology has been rolled out in Uckfield where six lifts have been installed. This investment has led to a two-thirds reduction in picking times and a space saving benefit that has allowed us to consolidate our Uckfield and Poole warehousing.
In the Midlands, we have vacated our Hartlebury site and replaced it with a more efficient property opposite our main Midlands site at Waterside Park. Bringing the two parts of our regional hub much closer together will allow operations to work more effectively as one core team, leading to cost savings.
Our manufacturing sites in Taiwan, Singapore and the UK have largely been operating at capacity over the last 12 months. This has led to an increased investment in Taiwan, while, in the UK we have re-worked our production scheduling processes which has allowed us to increase local capacity and reduce overtime costs.
Plans for the future
Given the success with the 'Lean-Lifts' in Uckfield, expansion is expected to continue across other sites, where the additional investment can be supported by operational savings.
In terms of our manufacturing efficiency, one particular area of focus for the coming year is our Malaysian operations. Due to a downturn in the domestic market, we currently have unutilised capacity at both of our Malaysian sites. The most significant opportunity for improvement exists at PSEP, where we have the capability to manufacture very high quality safety critical automotive parts. Our global and local sales, sourcing and manufacturing teams are working closely together to identify external opportunities and ensure we are making the right 'make or buy' decisions on a group as well as a local basis.
In terms of our management and business information systems, we are in the process of looking at further investment opportunities that will allow us to generate information more efficiently, so as to reduce costs in the longer term.