Turnaround and Post-Merger Integration

Situation:

• The business had an established name in a demanding B2B market in which securing an order required next day delivery from stock.
• The business was losing £100k/year.
• A newly acquired business had not been integrated and had a distinct cultural divide.
• Inventory was slow moving and working capital was 30% of revenue.

Task:

The engagement was to improve business performance to 10% of profit before tax (PBIT), to integrate the newly acquired business unit, and to reduce working capital to 15% of revenue.

Approach:

• Business diagnostics were run to measure transactional activity, value for money and credit terms in the supply chain, the flow in manufacturing, and the profile of customer/product profitability and draw on inventory.
• Market investigation identified the opportunity to increase sales volume at marginal cost through sales to key accounts and export markets if operating costs could be reduced.
• Bills of Material were created and a SysPro ERP/MRP system implemented to forecast and control material flow, together with SIOP to align output to demand and improved production planning.
• The product range was rationalised and re-engineered in consultation with customers so as still to meet their needs.
• Competitive supplier tendering, supplier-managed Kan Bans and faster turning rationalised inventories were implemented.
• A “One Company” culture was created through cross-skilling and engaging all employees in visual management systems and continuous improvement programmes.

Results:

• Turned around the business to make a profit of £750k (10% PBIT).
• Revenue increased from £5.2m to £7.5m.
• Annual savings of £370k were realised on £2.2m of annual purchase spend whilst improving supplier performance.
• Working capital was reduced to 15% of revenue.

The newly acquired business unit was culturally integrated and improvements made to its production flow.