Case Studies

Manufacturer Turns Profitable

By following a diagnostic process to identify key business leverage points and then proceeding forward with a structured project format, a materials manufacturer goes from -5% to +10% EBITDA in 7 months while establishing a tool for future acquisition analysis.

Challenge

The acquisition had struggled to provide an acceptable return on invested capital had not been EBITDA-positive for several years. As the parent company evaluated a few acquisition opportunities over recent years, it became clear to management that the acquired business line could be doing when compared across various benchmarks.  The divisional president stated they had been “picking around the edges” of improvement for years, but it was “time to thoroughly shake it all up, dump it out and rebuild it.”  The key questions to answer were:

1) How do we best manage this business?

2) What should be done to (at least) achieve breakeven profitability?

Discovery

To identify and deliver the $7m improvement, a “mini-wave” process was employed. This entailed a single, encompassing Diagnostic Phase followed by a number of Waves that developed specific ideas pertaining to an identified work stream. An important step was also to create a steering Committee composed of relevant senior management from operations and sales and other functions to help guide and support the program.

The team identified the following work streams and EBITDA improvement ranges. There were 16 ideas across the work streams.

Sales– fees and charges: $0.7m- $1.0m

Sales– margin improvement: $0.8m- $1.2m

Network Optimization: $0.6m- $0.8m

Operations: $0.8- $1.0

Materials: $0.6m- $1.0m

Truck load optimization: $0.8m – $1.2m

Fixed Costs: $0.8m- $1.5m

The client team drafted an executive summary for each generated initiative, including the approach to capturing the opportunity and financial driver trees to ensure the bottom line would be impacted.  A series of internal “syndications” helped top executives assess the feasibility from all areas of the business and understand how the competitors’ reactions could affect full idea capture.

Impact

The client rolled out the program in a series of 3 waves. The effort helped the company boost the bottom line by 18%. 

The process used to evaluate the current business was also used by the client to evaluate the potential savings in targeted acquisition operations.