Manufacturer Case Study: Project Leads to Revitalized Performance and Successful Sale Transaction

by Tom Uva

Elliott Davis Management Consulting Services (MCS) is a full-service business consulting practice that’s committed to a single, straightforward mission: helping clients operate more efficiently, effectively, and profitably.

Recently, the MCS team was engaged by a multi-state manufacturing company that was having significant profitability challenges at one of its key locations. This particular plant had experienced year-over-year operating losses, with the rate of losses increasing and no internal success in stopping or reversing the negative trend. Company ownership wanted to create a path to sell the company; however, those efforts had been put on hold due to the deteriorating financial performance.

Management and ownership were clearly aware of the losses, but they were not able to identify the root causes or create a clear path to sustainable recovery. This is where the partnership with the MCS team was formed. Leadership asked the MCS team to join the company as an extension of its management group to work collectively to solve the underlying issues and create a strategic solution that would be sustainable upon project completion.

One of the first steps was to develop a wide variety of key performance indicators (KPIs) to help identify the underlying root cause(s). Areas of focus included analyzing turnover rates, overtime and temporary labor costs, employee attendance, machine downtime, tooling and machine repair costs, scrap percentages, equipment efficiency, and a number of other data points. In addition, the MCS team outlined a path to recovery and steps to enhance long-term performance.

Based on a rigorous analysis of the KPIs, the MCS team identified multiple root causes for poor operational performance. For example, at the time MCS engaged, overtime and temporary labor costs accounted for more than 55 percent of payroll. Targets of 10 percent to 12 percent were quickly established, and fact-based improvements were implemented. The enhancements exceeded targeted performance goals, reducing those costs to as low as 5 percent to 6 percent of payroll. MCS was also able to show management how to reduce fixed labor costs by 10 percent while increasing throughput and first-pass yield.

From a financial perspective, MCS worked with company leadership to re-factor the P&L to improve visibility into the business and make better-operating decisions. After analyzing the company’s top-line revenue challenges, daily sales metrics were created and implemented to hold the sales team more accountable. This, in turn, led to an increase in sales.

Additionally, the MCS team analyzed Bill of Material (BOM) data and established more accurate cost standards, which gave management a better basis for making business decisions. The MCS team also worked side-by-side with company leadership in managing cash flow and strained vendor relationships. These efforts helped improve availability of raw materials required to meet production demands.

Through the implementation of multiple improvement efforts, machine downtime was reduced by 60 percent, and scrap was reduced by 50 percent. These improvements yielded very significant monetary savings for the company. MCS also helped the company develop better working relationships with its external banking and financial partners as the organization progressed through the recovery.

In the end, the success of the turnaround effort prompted company officials to reinitiate the sale process and execute the organization’s succession plan. The MCS team then began working with leadership to maximize the company’s valuation and position it for a successful sale. The results of these efforts led to the execution of a successful sale in 2019.

MCS’s Strategies for Growth and Sustainability

When a company partners with MCS, our team invests the time to thoroughly analyze the areas within the business that are disrupting productivity and keeping the organization from reaching its full potential. Then, we develop and help clients implement a customized plan that’s simple, practical, and results-oriented.

Although our approach has been highly successful for many companies and projects, we realize that Elliott Davis MCS can’t be all things to all people—and we don’t try to be. Rather than casting services far and wide, the MCS team drills down into six core disciplines to develop the most comprehensive solutions for companies looking to enhance their performance in those areas: business strategy, business optimization, project management, technology advisory, mergers and acquisitions, and turnaround/recovery. By focusing on this niche, the MCS team is positioned to help small- to mid-market companies improve profitability, reduce or eliminate inefficiencies, and enhance operational performance.

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Tom Uva is located in the Greenville, South Carolina office of Elliott Davis and has more than 25 years of extensive, high-quality operational experience in various industries where he held senior leadership roles, including vice president of business optimization, CIO, and vice president of operations. If you need assistance or have any questions, please contact him at tom.uva@elliottdavis.com.