• Apparel
• Creditor
• Debtor
• Distribution
• Government
• Healthcare
• Management
• Manufacturing

MANUFACTURING

One of our turnaround clients was a family-owned and operated private label processor of juices and food products.  The company had sales in the $100 to $125 million range and was “sales driven”.  The year before ESBA’s engagement, sales grew by $10,000,000, but the company’s gross profit fell by $500,000 compared to a year earlier.  They were only marginally profitable as they carried too many products "to round out the line" or "to help absorb the manufacturing overhead."

Operations were at three very old multi-story facilities in two states, with old and sometimes technically obsolete equipment.  Raw material storage, warehousing and finished goods distribution were awkward and inadequate, especially during peak seasons. The company operated in an extremely price-sensitive, service-conscious marketplace, with scant customer loyalty and few opportunities to increase the perceived value of products. Branded products that set the standards for price, quality and delivery dominated many of the company’s product categories. Moreover, employee turnover was high and recruiting qualified people was usually difficult.  Although the company enjoyed good vendor relations and payments were current, their lender was extremely concerned about the bank's exposure on an asset-based line of credit in the $20,000,000 range.

Key Turnaround Steps:

• Gradually changed the focus from sales to profits.  "It is better to be a profitable $100,000,000 company than unprofitable at $125,000,000 in sales."
• Consolidated the operations into the two facilities reducing the workforce. Rearranged workflow to maximize utilization of an inefficient facilities layout.
• Analyzed sales (ranked customers within products by gross profit percentage) and determined, contrary to management’s belief, that prices could be raised without significant risk to the most profitable, "core" business, and effectively raised average selling prices by 10%.
• Directed the use of raw materials that were in relatively short supply, as much as possible within overall production commitments, into the optimal product combinations.
• Began the initial steps toward developing the company’s own "branded" product to increase customer loyalty and profitability.
• Involved sales, operations, and purchasing in the production planning process to affect a "just-in-time" approach, reducing inventory, eliminating or reducing storage problems, and significantly improving customer service.
• Added a new product line to improve production plant efficiencies.

Results