Restructuring Archive

Manufacturing Company Turnaround

The Challenge:

• Business was unprofitable, cash negative and losing customers. Management in conflict & demoralised.

• 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.

• Disorganised and dirty factory that had been put on notice by BRC to improve in 6 months. Poor delivery lead time, weak safety, 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 UK, Ireland and Benelux.

 Productivity = Profitability.
 Develop your team and plan.
 Engage, energise & empower your people.

The Solution:

• 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 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 thermoformers. 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, order turn around. OTIF 99%.

• This process together with Kaizens energised the shop floor and forged strong (e.g. T/F tool change cut from 4 hrs to 2 hrs then 15-30 mins).

• Reorganised management & segregation of rework and reduced bad waste to <0.1%.

• Implemented safety improvement plan with monthly meetings. Guarding, ASIs, Risk assessments, changed material flow, implemented safe WIP roll handling. Removed FLTs from production aeras.

• Reduced NPD lead times from months to 4 weeks through key alliance with tool maker.

• 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.

Results:

• Reduced breakeven from £13m to £7m, brought company to profit in 12 months, reduced stock by 80% in 8 months. Improved OEE by 73% in 18 months.
• Cash positive in 18 months.
• Direct labour reduced from £2.4m to £1m pa, material cost decreased by 22% in 12 months.
• Reduced low margin business, grew sales profitably to £9m in 2 years.

Written by    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. Continue reading