The ProAction Group is focused on sharing our thought leadership to help organizations improve their operational efficiency and ultimately their bottom line. In that spirit, we are pleased to provide you with a digital edition of Insider 94, The Midwest Business Journal for entrepreneurs, tailored to the business owner (https://www.insider94.com). The publication offers relevant, current, and unbiased advice covering issues we all encounter as entrepreneurs and individuals. We are also featured contributors!
Category Archives: Uncategorized
What Your Business and Speed Skaters Have in Common and Why You Need to Up Your Ante With a Good Coach
Timothy Van Mieghem – The ProAction Group
The Olympic games are nothing short of inspiring. The backstories, the challenges and the opportunities for glory all come together on the world’s stage for these athletes.
I find speed skating especially incredible and relatable to my line of work. Speed skating is a racing sport with the primary aim to complete each circuit in the fastest time possible. To win a race, the athletes must adopt a particular set of techniques including balance and positioning – and then add speed.
The technique, process, and analysis to reach this level of magic is analogous to preparing an organization to win at the profit game (which is my Olympic sport).
Let me explain.
The road to operational excellence requires balance and positioning of a different kind. All organizations race for results to earn gold for investors by increasing the internal rate of return, meet loan covenants or personal gain. As in speed skating, organizations must find the right balance and positioning of whatever the opportunity for improvement is. If you can identify it, it can be quantified. Once it is quantified, we can plan for it. Once an organization has identified and quantified the opportunity for improvement – then speed comes into the equation. How fast and for how long?
At The ProAction Group we call this the ProActive Profit Process — and we’re excellent coaches. We can help identify and quantify what needs to improve, and then tell you how fast you’ll need to go to achieve success sooner. Like any great coach, we’ll work the formula with a proven process that lands you on the winner’s podium in your industry’s competitive landscape (and it won’t take four years to prove it). We’ll map out the implementation at the agreed speed to assure you that you’re covering the distance between where your organization is now and where it needs to go. Beyond implementation, we’ll be there to institutionalize changes for sustained results.
Balance and positioning at a high rate of speed is challenging for any organization, however with a good coach, with a proven track-record to guide the way, makes the difference. Let us help.
Big EBITDA Gains Identified in Overstocked, Underperforming Portfolio Company
Background
- Underperforming portfolio company had excess inventory; products with limited shelf life compounded losses.
- EBITDA performance lagged the industry and fell short of projections.
- Exiting would drag down overall fund performance.
Eight years after purchasing a consumer product company, our private equity client found themselves in the frustrating position of spending too much time and attention on one underperforming portfolio company.
The issues were clear: inventory kept increasing, and management was at a loss to explain why. Matters were further complicated by some of the inventory’s limited shelf life. Though demand was very seasonal, at the end of their last busy season the company had the highest inventory levels in its history. These issues resulted in an EBITDA to sales ratio of less than 6.5%: earning less than $6 million in EBITDA on about $100 million in sales.
Exiting the underperforming company wasn’t feasible, as it would result in mediocre performance for the client’s fund.
Actions Taken
- Optimized processes around the 8% of customers and 22% of SKUs that make up 88%+ of gross margin produced.
- Built the business case to consolidate 4 facilities into 3.
- Designed a Lean enterprise and a planning culture, with tracking and monitoring methodology built into all processes.
ProAction performed a Sell Side “QofOps” to identify and quantify their opportunities to create a claim value before their exit. Here are the highlights:
- Recast Inventory: The company had $28 million in inventory, and we modeled how much they really needed given their supplier lead times, manufacturing capacity and customer locations. They only needed $12 million to run the company assuming solid processes and systems.
- Segmented the Business: One size does NOT fit all! We segmented the business into 9 segments. We learned where they made money and where they gave it back. This allowed us to develop surgical recommendations to project their position with important customers and their ability to serve other customers in a profitable manner.
- Targeted Savings: We examined their SG&A spend, their approach to sourcing purchased goods and services, and their DC’s and factories. This allowed us to quantify how much more EBITDA they can generate at the current sales levels.
- Re-designed Planning Processes: We reviewed the company’s supply and demand planning processes, and isolated opportunities to leverage supplier resources, reduce inventory, and increase order fulfillment levels.
- Fostered Adoption: By including key members of the management team in the design process, we were able to do more than deliver a report. We generated a detailed implementation plan and laid the foundation for change.
Measurable Results
- We built the business case to achieve the following:
- EBITDA Increase between 69% and 108%.
- Inventory reduction of $16 million.
Quantified Impact of Recommendations:
- Increase EBITDA between 69% and 108%.
- Pay down up to $16 million in debt.
- Increase order fulfillment, customer satisfaction levels, flexibility and inventory turns.
- Reduce customer lead times.
- Fully leverage recent ERP.
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 “QofO”.
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
The ProAction Group, LLC
Chicago, IL
Tel: (312) 371-8323
The Competition is Fierce. Change the Rules. ™
Sell Side Q of Ops
Background
- Identified changes to manufacturing processes could drive a meaningful increase in the company’s market value in less than a quarter.
- These changes required 8 weeks to implement and a immediately demonstrated a 44% increase in production per labor hour
Our client was looking to seek new investors in a manufacturer of consumer products located in the Southeast Region of the US, and requested that we tour the operation.
Fortunately for everyone involved, we saw immediate opportunities for improvement. The company’s production runs were designed to manufacture 8-12 week supplies of any given SKU. Naturally, this was creating a feast or famine situation. Overproduced SKUs tied up capital, while fulfillment of items still in the queue was delayed and expensive. We believed that implementing Lean Manufacturing principles would result in a 40% increase in production per labor hour. This would dramatically impact the organization’s capacity, throughput and EBITDA.
Actions Taken
• Redesigned the factory layout and executed on that design
• Implemented Lean Manufacturing
• Streamlined processes to decrease materials handling and improve efficiency
• Reallocated staffing to realize additional capacity gains and reduced labor spend
ProAction illuminated the path forward for our client:
Re-designed Processes: The company’s throughput could be greatly increased by employing a one-piece flow manufacturing process instead of batching. This new Lean Manufacturing model is efficient enough to create labor and staffing reductions, and can drive a cycle of continuous improvement. It also substantially decreases lead times.
Improved Capacity: During our review we found that one particular product was accounting for 24% of the company’s sales. As we planned for the future state, it was clear to us that implementation of the one-piece flow system would allow the company to realize a 30% capacity improvement for this product with one less line and three fewer people.
Facility Layout Improvements: Layout changes dovetailed with the company’s new Lean Manufacturing to accomplish two goals. It made production processes more transparent, making oversight easier and ensuring abnormalities would be spotted quickly. It also reduced wasted travel and motion. The changes enable production rates to be set by product type, leading to more accurate scheduling and increased accountability.
Labor Balancing: When considering staffing reductions, we found that continuing the fourth packing line and filling it out with three employees who had become redundant elsewhere would increase capacity improvement from 30% to 38%. Co-locating the company’s two warehouses reduced staffing and expenses.
Measurable Results
• 44% productivity increase
• 25x return on dollars spent
• Full transition in less than 8 weeks
- 10% reduction in labor
- 38% increase in capacity
- 44% increase in productivity
- In excess of $300,000 reduction in direct labor spend alone
- Shorter manufacturing lead times
- More visible, easier to manage “one piece flow” process
- 5% to 15% additional savings in receiving, inventory control and shipping
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 “QofO”.
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
The ProAction Group, LLC
Chicago, IL
Tel: (312) 371-8323
The Competition is Fierce. Change the Rules. ™
Introducing – The ProAction Group
We designed The ProAction Group to serve PE clients. We have deep experience in the deal environment. We are responsive on very short notice. We know how to interact with deal teams, lenders, and other advisors in a time-efficient and productive manner. We understand the importance of “showing well” to a target acquisition. We know how to interact constructively with target company management.
With portfolio companies, we know how to build trust with boards and management. We also understand that CEOs don’t want to have resources forced on them.
We have PE-oriented fee structures.
“The Beverly Hillbillies” Prequel? We are Up to the Task!
As Netflix streaming keeps all of us entertained during the pandemic, we’ve been delighted with reboots and potential reboots of our favorite sitcoms and dramas. We enjoy characters with a sense of nostalgia. The Star Wars franchise stays alive with great stories and satiating curiosity for Luke Skywalker’s back story. It got us thinking, what about a prequel for “The Beverly Hillbillies”?
Continue reading “The Beverly Hillbillies” Prequel? We are Up to the Task!
Manufacturers – This Looming Pandemic Effect Could Disrupt Your Business. Are You Prepared?
Just as we are finally able to turn our thoughts away from the global pandemic and the transition of power in Washington, we appear to have a new threat looming on our doorstep, inflation. Consider that:
Tim Van Mieghem Podcast Speaker: Part 2 – The Value of Business Intelligence: Understanding and Measuring Operational Issues
The second part of Tim Van Mieghem’s interview with Jack and his team at Nestell Associates’ podcast, focuses on helping companies actually leverage their ERP systems. In this episode, we talk about measuring operational issues!
Listen to: Episode 14, Part 2 here.
Timely and accurate visibility to operational data is a significant competitive differentiator. This episode discusses how to turn data into insight that is actionable. We discuss many people, process, and technological influences that help ensure organizational business intelligence availability and alignment.
ProAction helps companies identify improvement opportunities through data-based evidence, which fosters organizational support for change. We also explore the challenge of strategic decision making with Tim.
If you missed Part 1, you can listen here.
Nestell Associates Podcast Homepage: https://nestellassociates.com/podcast-home/
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:
- Help you win good deals (and avoid bad ones!) through our pre-close Operational Diligence.
- Help your management teams as they transition from an entrepreneurial approach to a scalable, process driven leadership path.
- 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!