Coronavirus is Disrupting the Supply Chain.  Here’s What Companies Can Do About It

Martin Staples, a member of The ProAction Group team, is a senior operations leader and change facilitator with over 27 years of global business experience. He recently sat for an interview with NPR Milwaukee producer Audrey Nowakowski to discuss how coronavirus is disrupting the supply chain and what companies can do about this.  In this article, Martin shares: 

Immediate Steps Recommended for Businesses

  • Have multiple sources for larger volume components. 
  • Make sure you talk to suppliers to evaluate the risk to your supply chain: “Do they buy directly from China? Or do they know of any risk to their supply chain?” 
  • If you have long purchase orders, bring in more supplies than you normally would: “Raise up to 30-60 days of inventory on parts.” 
  • Keep your relationship with your suppliers strong: “You want to keep in touch so that you’re getting first-pass when things go bad.” 

 

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Private Equity Firms Need Manufacturing Operations Expertise More than Ever Before

As The ProAction Group approaches its 25th anniversary, we asked Partner Tim Van Mieghem to reflect on the change he has seen in their clients’ needsOver 80% of The ProAction Group’s business comes from Private Equity firms and their portfolio companies, so it comes as no surprise that change in the PE industry is top of mind for Tim“PE firms have to pay more today for businesses than they did 10 years ago because there is so much competition for the deals. It is more important than ever that PE firms truly understand both the risks and opportunities of each potential deal.  

Let’s Talk About Risk

As the deals become more expensive, PE firms need to know if they are going to inherit a problem and have to “write another check” after they write the check. “I wish we had talked to you BEFORE we bought,” is a common refrain among our clients.  Here are some of the often hidden but significant expenses that manufacturing operations experts help uncover: 

  • A need to invest in capital (machine rebuild / reinvestment) 
  • A weak team 
  • A terrible ERP system 
  • An extreme reliance on “tribal knowledge” 
  • A missing resource that the company needs for growth, such as a controller or demand planner 

And, Let’s Talk About Opportunity 

Another way that experts in manufacturing operations provide value in the deal diligence process is helping PE firms understand just how much a business COULD be worth when run with optimal efficiency. “There is a broad spectrum of business efficiency,” Tim says. “In some companies, the CEO really knows how to make money, and the only way new ownership will make a return is to significantly grow the business. Other businesses have numerous opportunities for growth and efficiency that haven’t even been explored.” Tim continues, “A PE firm we work with was considering purchasing a packaging business that had $6 million in earnings. After we evaluated the business, we felt confident that earnings could be $9 million. We built the business case for this increase, including our detailed analysis, and with this information, our client increased their bid, won the business, and quickly realized the gains.”  

Having expert operations consultants is a key strategic weapon in helping PE firms deliver superior returns. If you are considering a deal that you would like The ProAction Group to review, we would look forward to discussing how an operational diligence might be relevant.

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