Quality Problems, Late Deliveries, Lost Customers

Portfolio companies often run into complex situations that drain resources and stifle performance.  In this case, a packaging company saw scrap levels quadruple, late deliveries skyrocket and good customers leave.  The management team was doing the best they could, but had limited bandwidth and experience with similar situations.  The sponsor could not afford the current level of performance, and the costs and risks of replacing the management team were high.  ProAction became, on a variable cost basis, their operating partner.

Background:

  • $250k negative monthly variances ($1.7m per year in total)
  • 5 GM’s in 5 years
  • Customer Attrition

Actions Taken:

  • 2-day operational assessment found root causes and were immediately transitioned into execution
  • Implemented a tiered management system
  • Conducted quick change over improvements
  • Managed COVID situation

Activities as the interim GM:

  • Started a daily operator autonomous maintenance process for Presses and Converting
  • Started a weekly maintenance PM process for both Press and Converting
  • Implemented a tool crib min/max for critical replacement tooling parts in Converting
  • Set up a converting staging area for all machine lines
  • Started problem solving tools with supervisors and leads in both Print and Converting
  • Relaunched the Safety Committee
    • Added First Responders on each shift
    • Action plans developed for each area from opportunities and tracked weekly on the Tier Board

After operational stabilization was achieved, we began implementing tools and training internal leaders to maintain the new level of performance.

Impact

  • Output improved between 50% and 70% depending on the line
  • Reduced scrap and rework levels by 50% in 8 weeks, demonstrating a 90% decline in 12 weeks
  • Hit customer service target levels and eliminated the backlog

About The ProAction Group

ProAction is an operational consulting firm that works with Private Equity to do three things:

  1. Help you win good deals (and avoid bad ones!) through our pre-close Operational Diligence.
  2. Help your management teams as they transition from an entrepreneurial approach to a scalable, process driven leadership path.
  3. Help you maximize the value of your portfolio companies through the implementation of operational excellence.

We focus on three sectors: consumer products, manufacturing and distribution. We have experts in Lean Manufacturing, Six Sigma, Sales and Operations Planning, Inventory Strategy, Sourcing, Logistics and Human Capital Development. We were founded in 1995 and are headquartered in Chicago.

For Further Information:
Timothy Van Mieghem
tvm@proactiongroup.com
The ProAction Group, LLC
Tel: (312) 371-8323
www.proactiongroup.com

The Competition is Fierce. Change the Rules. ™

The ProAction Group Celebrates 25 Years!

This Saturday will mark the 25th anniversary of registering ProAction as a new business with the state of Illinois.  Through the years there have been many challenges and changes. We’ve made it thru the dot com bubble, the Great Recession and now the COVID pandemic. But in weathering these storms and overcoming the obstacles they presented, our faith became more resolute, our vision became clearer, and our company became stronger. Continue reading The ProAction Group Celebrates 25 Years!

Re-Casting Inventory and Your Storage Needs – Virtual Webinar

Join our Virtual Webinar: Re-Casting Inventory and Your Storage Needs

Friday June 26, 2020, 10:00 – 11:00am Central

Register Here

Facilitators: Tim Van Mieghem (The ProAction Group) & Mike Magliano (Cushman Wakefield)

Topics covered:

  • The tools available to re-cast the inventory requirements given demand patterns, capacities, and lead times.
  • How to rebalance your existing storage space (internal and external) with your “new” inventory requirements.
  • Winning support from your leadership team to take action.

Supply Chain Leaders should NOT miss this call if:

  • Questioning inventory levels.
  • Concerned about unutilized space or inventory in the wrong location.
  • Experiencing poor order fill rates or growing inventory levels.

Registration is free and required.  Call details will be sent via email.

Opportunities in Crisis: Implementing and Measuring Supplier Changes

In our previous posts, we focused on how to objectively identify underperforming suppliers and constructively negotiate needed changes in supplier relationships. However, reaching an agreement on changes and actually seeing them adhered to are two different things. While we are generally trusting of supplier partners, in cases like these it is essential to “trust but verify” that the new elements are being implemented by both companies and accomplishing the desired results. Here again, data is power.
Continue reading Opportunities in Crisis: Implementing and Measuring Supplier Changes

Opportunities in Crisis: Negotiating with Underperforming Suppliers

In the first of our posts on crisis-related supply chain opportunities, we examined the benefits of addressing underperforming suppliers and how organizations can approach the process. In essence, that first step is about identifying perceived supplier issues and then resolving to act. Once that decision is made, the word “perceived” should be eliminated and the groundwork for negotiating can begin.

Continue reading Opportunities in Crisis: Negotiating with Underperforming Suppliers

Opportunities in Crisis: Identifying Underperforming Suppliers

The life-changing effects of our new viral enemy compel us to contemplate what it all means, both personally and in our roles as business leaders. Personally, it has reminded many of how vulnerable we truly are, bringing about lifestyle adjustments to better manage health and wellness risks moving forward. For business leaders, many have been consumed by short-term negative impacts. Leaders should, however, also view this as an ideal time to look for long-term opportunities that will improve the health and wellness of their business.

Continue reading Opportunities in Crisis: Identifying Underperforming Suppliers

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: 

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

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.  

Continue reading Private Equity Firms Need Manufacturing Operations Expertise More than Ever Before

ProAction Profile: Perry Hall

Perry HallWith over 30 years of experience, Perry Hall, an expert in Operational Excellence, including facility layouts, has helped many of The ProAction Group’s clients improve manufacturing efficiency and facilitate continuous improvementPerry’s expertise is often leveraged when businesses are building, re-configuring or consolidating facilities.  He designs optimized layouts with project plans for implementation, and he often works with clients through plan execution. 

From automobiles to shampoo, Perry’s manufacturing experience is vast. One ProAction Group client, a haircare company, manufactured their own private label products as well as those of other brands. The business did not have a strong understanding of their capacity and felt there were opportunities to improve efficiency. Perry broke the various jobs into families (shampoo, conditioner, etc.), considered orders and variables such as product viscosity, and designed a new scheduling planHe was able to redo the company’s standards so that they understood what they should be accomplishing each day. He also implemented The ProAction Group’s process of “Manufacturing for Daily Improvement, and the financial improvements his work generated enabled the company to command a premium price when they were sold.   

Another ProAction Group client manufactures blister packs for medications. Their employees were always working overtime, and still, customer orders were often late. Perry leveraged ProAction’s “9-Box Insights” to identify optimization opportunities. He created an index for equipment availability, and with better planning and sequencing, the company was able to service customers on-time and dramatically reduce their second shift labor hours 

Perry has numerous best-practices to share when it comes to plant-layout and manufacturing. He encourages businesses to think beyond the widget-making and consider how materials will flow into and out of facilities. What floor space may be needed for batch manufacturing? How will materials be delivered to assemblers? 

Throughout his career, Perry has lent his consulting expertise to the portfolio companies of Private Equity firms and many mid-size and Fortune500 manufactures. Next month Perry celebrates his 10th year working with The ProAction Group. Click here to engage with Perry or other experts at The ProAction Group. 

Look for These Signals to Find Hidden EBITDA in Manufacturing Operations

Smart businesses are always looking for ways to increase operational efficiency and maximize company value. After performing hundreds of operational assessments over the past two decades, The ProAction Group has become adept at identifying hidden EBITDA opportunities for our clients. We all know every business is unique. Some of these indicators may pique your interest and others may represent areas where your business is strong.  Still, reviewing this list can help you consider where some meaningful improvements may be made.

Signs Hidden EBITDA May Exist

  • The Sourcing Strategy is undocumented, poorly defined or under-utilized.

When companies do not have thorough, documented sourcing strategies, they may be missing opportunities to improve costs on goods purchased. Spend may be set-up or managed by untrained buyers who without defined strategies and training may lack skill in negotiating with suppliers. Is the strategy for frequency of competitive supply bidding well defined? Is supplier performance measured? Are individual sourcing agreements documented?

  • Inbound freight fees are “included” in product costs.

“Freight is Free” is a signal to dive deeper. Often suppliers build profit into freight charges. Companies not unbundling freight fees from product costs should investigate to see if cost efficiencies may be gained here.

  • Manufacturing variations aren’t measured or addressed.

Measuring plant performance is critical. Tracking performance – and variations in performance – can highlight problem areas. Management should be tracking things like safety, quality, cycle times, scrap, schedule attainment and on-time delivery. Businesses that identify and measure variation in these can make strategic decisions about changes to employ. When variation is reduced, costs go down.

  • Sales forecast is not effectively managed.

Sales organizations that do not forecast well put unnecessary burden on operations in the form of downtime, expediting costs, overtime, E&O inventory (see below) and more. Do sales forecasts regularly align with actual closed business?

  • Excess and Obsolete inventory is growing.

Companies often do not pay close attention to E&O soon enough, yet avoiding E&O can bring significant cost savings to an organization. Is E&O tracked and measured? Is E&O root-cause analysis performed with corrective action identified? Does aging of inventory show balances that exceed the amount held for reserves?

  • Invoice accuracy, denials and chargebacks are not measured or tracked.

Inaccurate invoices, denied claims, chargebacks and credit memos all indicate potential opportunities for improvement. When these items are not actively tracked and measured, it is unlikely that they are well-managed.

Many manufacturing businesses have operational blind spots (some more than others) that negatively impact enterprise value. This article shares some signs for potential hidden EBITDA, but the list above is far from exhaustive. We hope it gets you thinking about areas for improvement in your manufacturing operations.

Contact us if you’d like to further explore your business’ best opportunities for uncovering hidden EBITDA. We can share with you how The ProAction Group 9-Box Framework leverages your operational data to identify the efficiencies that will make the greatest EBITDA impact on your business. For further reading, see Leveraging 9-Box Insights” to Find Hidden EBITDA: Turning Data Into Insight.