Operational excellence, margin and productivity improvement

“The fact is, when you're below 90, we're missing sales. So by getting our operations to run better, that is a growth lever.”

“And finally, we have too much inventory at about $4 billion in 102 days at the end of Q2 and yet our service levels are only in the mid-80s. Our bottoms up analysis indicates we should be closer to 75 days of inventory or lower, which would imply about $1 billion cash opportunity over time while we drive on time in full above 90%.”

“While our network of 110 factories and 95 distribution centers have historically served 3M well, it is incredibly complex and interconnected, with most SKUs we produce touching multiple factories before reaching the customer.”

“Relative to yield loss, our raw material waste is running close to 5% of cost of goods sold, due in part to how we design and manufacture our products, but also due to inefficient production scheduling and changeovers.”

“We have more than 25,000 direct and indirect suppliers, including nearly 4000 contract and component manufacturers, yet more than 80% of our raw materials are sole sourced.”

“For example, a command strip touches five factories and two distribution points before it hits the store shelf. This extends cycle times, increases goods in transit, and drives up logistics and freight costs.”

“It will take a fundamental shift in our approach to raise service levels to where they need to be. And we're doing this by standardizing the demand planning process, using new algorithms to improve forecast accuracy, improving supplier delivery performance, and driving consistency and reliability in logistics.”

“OTIF was 88% for the year, up 3 percentage points versus last year and 8 points versus 2022. Our team has made solid progress, but we have more work to do. While Consumer and Transportation & Electronics are now consistently delivering to their customers at over 90% on time, our performance in Safety & Industrial remains well below expectations in the low 80s.”

“Our goal remains to deliver 2% net productivity through sourcing efficiency, quality improvement, lean manufacturing and asset utilization, which I described last time as Operating Equipment Efficiency or OEE.”

“This is just the start as our goal is to get to 75 days, freeing up cash for our capital deployment priorities, which include returning cash to shareholders.”

“Clearly running at 88% is not where we need to be. We're feeling -- we're running around 93%, a little over 93% in Consumer. We should be in the high 90s. That's the expectation of some of the big-box retailers.”

“The concern really is in SIBG, the Safety & Industrial business in the low 80s. We're definitely losing business for sure there. We are not delivering. When somebody needs something right now and we don't have it available, that is causing them to go someplace else, even though we have a better brand, sometimes a better product, and attractive price.”

“Our intention is to prioritize OTIF over inventory, frankly. That's what we think is really important. That's a greater lever.”

“On-time in full or OTIF increased 3.5 percentage points versus last year, and about 1 point sequentially to 89%, the best quarter we've had in the past five years.”

“Our metric for equipment utilization or OEE was up 4 percentage points sequentially to 58%, and is now deployed on 191 key assets across our 38 largest factories, a 10x increase over this time last year, and covering about 50% of production volume.”

“improving it, delivering on-time-in-full to customers is quite important. We know from talking to our end customers. It is an element of churn why customers leave us.”

“One of our larger coders is in Knoxville, Iowa, making fiber adhesive tapes through an extensive effort to reduce changeovers, increase operating speed and improved machine uptime, the team drove a 12-point improvement in OEE and freed up enough capacity to retire two 70-year-old coders at another facility.”

“On service, our on-time and full metric reached 89.6%, the highest quarterly performance we've achieved in nearly 6 years, and we exited June at just over 90%.”

“This gives us confidence in our expectation that this portfolio will deliver greater than 50% gross margins as we look forward.”

“We believe we can. We have a significantly higher margin portfolio today with a 1,000 basis point move over the transformation of Emerson to plus 50% GP portfolio.”

“We see meaningful opportunities to leverage Emerson's management system to improve operating margins, cash flow and innovation productivity as we have demonstrated with test and measurement.”

“Gross profit margin of 53.5% was a 130 basis point improvement year-over-year, demonstrating how customers continue to recognize the value of our leading technologies.”

“Operational excellence is a hallmark of Emerson Electric Co., and we have plans to further expand adjusted segment EBITDA margins by 240 basis points by 2028.”

“We remain confident in achieving our 2028 targets: the $21 billion top line, 40% incrementals that delivered a 30% adjusted segment EBITDA margin, $8 of adjusted EPS, and a 20% free cash flow margin.”