A business turnaround case study is a detailed analysis of a business that has faced significant challenges and has been able to successfully recover.
The case study provides insights into the reasons behind the business’s struggles and its eventual turnaround. It also highlights the key strategies and tactics that were used to achieve business success like increased productivity or profitability, better reviews or feedback from customers, etc.
The case study can be an invaluable resource for business owners and managers who are seeking to improve their own business performance. By understanding the reasons behind a successful business turnaround, they can learn from the mistakes of others and apply those lessons to their own businesses.
Here’s one example of a business turnaround case study for a manufacturing company.
Manufacturing Company Turnaround Case Study
- The business was unprofitable, cash negative, and losing customers. Management in conflict & demoralized.
- Customers were very unhappy and were reducing orders and changing suppliers.
- The manufacturing process consisted of extrusion and thermoforming, i.e. a linked batch operation.
- A disorganized and dirty factory that had been put on notice by BRC to improve in 6 months. Poor delivery lead time, weak safety, and bad maintenance.
- Order lead time was very long and OTIF very Management had therefore decided to make trays to a forecast and this had exacerbated the problem further and driven up WIP and FG. WIP and FG stocks were in excess of 6 months.
- Stock counts were uncontrolled and not carried out regularly at month-end.
- Although cash was very tight there was no effective cash forecast regime in place.
- There was an inadequate sales plan in place which was subsumed by the need to constantly deal with customer crises related to late delivery and quality problems. There was excessive dependence on two customers.
- Customers in the UK, Ireland, and Benelux.
- Reduced headcount from 138 to 65, dismissed all directors and two managers, and in the process eliminated two layers of management.
- Developed management team & strategic plan & implemented Lean. Reviewed sales & production through value stream analysis & drove the integration of these functions.
- Changed ‘make to forecast’ to ‘make to order. Reduced FG stock to 10 days & WIP to 5 days, eliminating a 3000 sqm store. Cut order delivery time to 24hrs on identified lines.
- Set up shop floor data collection and installed IT that provided real-time performance measurement on 2 extruders & 8 thermo-formers. Measured Availability, Speed, Quality & OEE reviewed by shift. Implemented asset care system. Improved availability & developed planned maintenance.
- Integrated the order entry and production planning processes, drastically improving service speed, flexibility, and order turnaround. OTIF 99%.
- This process together with Kaizens energized the shop floor and forged strong (e.g. T/F tool change cut from 4 hrs to 2 hrs then 15-30 mins).
- Reorganized management & segregation of rework and reduced bad waste to <0.1%.
- Implemented a safety improvement plan with monthly meetings. Guarding, ASIs, Risk assessments, changed material flow, implemented safe WIP roll handling. Removed FLTs from production areas.
- Reduced NPD lead times from months to 4 weeks through a key alliance with a toolmaker.
- Worked closely with sales team & key customers. Weekly reviews of existing customers and new business development.
- Established detailed monthly financial reporting & 12-month rolling cash flow updated daily.
- Reduced breakeven from £13m to £7m, brought the company to profit in 12 months and reduced stock by 80% in 8 months. Improved OEE by 73% in 18 months.
- Cash positive in 18 months.
- Direct labor reduced from £2.4m to £1m pa, and material cost decreased by 22% in 12 months.
- Reduced low margin business, grew sales profitably to £9m in 2 years.
In business, there are always ups and downs. Companies that can weather the storm and come out stronger on the other side are the ones that are leaders in their industry.
When a company is in trouble, it can be tempting to give up and liquidate assets. However, sometimes the best course of action is to go through a business turnaround.
This involves making changes to the way the business is run in order to get it back on track. Sometimes this means making cutbacks and reducing expenses. Other times, it might mean investing in new technology or expanding into new markets.
Whatever the case may be, a business turnaround can be a difficult but necessary process. If done correctly, it can help a company to come out of a difficult situation even stronger than before.
Written by Mike Stewart, BSc Chem Eng, MBA: Strong practical experience at MD level. International experience includes being ‘parachuted in’ on a number of occasions to turn around troubled companies, as well as entering new markets and growing businesses.
Led 3 turnarounds in 7 years at £40 -£60 m pa businesses (330-500 people). All were complex multi-site manufacturing businesses with very demanding JIT customer service requirements.