Operations improvement restores manufacturer to profitability

What a difference 60 days makes. Thanks to Plante Moran’s restructuring & turnaround practice, that’s how long it took one Ohio foam products manufacturer to return to profitability after two consecutive years of losses. How did they turn around so quickly? By understanding the need to change and embracing the more than 100 potential improvements identified by Plante Moran. 

A little history

Founded 65 years ago, this manufacturer has enjoyed a long history of impressive performance—that is, until a few years ago, when a perfect storm of declining sales and margins, increased overseas competition, and increased raw-material and energy costs all combined to result in two consecutive years of losses. As the company entered its third year of losses, its bank strongly recommended seeking an outside opinion and assistance. To combat these losses and satisfy its bank, the manufacturer turned to Plante Moran’s Restructuring & Turnaround team. 

Incremental changes yield vast improvements

Leveraging a combination of data analysis, field observations, and one-on-one and group interviews with staff at all levels, Plante Moran identified more than 100 potential improvement opportunities, totaling $1.5 million in annual savings in the areas of revenue and margin enhancement, manufacturing overhead, material cost reductions, and headcount reduction. One critical improvement identified the need to dedicate time each week for research and development to test new formulas; very quickly, the team developed a new formula using less expensive components saved hundreds of thousands of dollars a year in materials. Another significant improvement inserted sensors in equipment to enhance quality control which produced fewer inferior products.

Cultural change

Achieving fast results required an “all hands on deck” approach. Plante Moran organized five rapid improvement teams within the company; these teams were charged with working out the details and implementing improvements. To assure sustainability of the benefits beyond Plante Moran’s involvement, the teams were trained in various continuous improvement techniques. Today, improvements continue to be made, and the company has adopted a continuous improvement mindset.

60 days later

Rapid implementation of these improvements resulted in immediate savings; the company was profitable within 60 days of the start of the engagement, even as it entered its seasonally slow period. The results have been significant—6 percent increase in net operating margin, vastly improved fiscal-year 2007 results, and an outlook for 2008 that includes targeted sales growth, closely watched spending, and robust manufacturing performance. The quick action also created momentum within the organization, energizing staff to make further improvements. It just goes to show how quickly things can and do turn around—with a little help from Plante Moran.