Manufacturing

The Problem: The company’s revenues deteriorate steadily each year with shrinking margin due to
competition that resulted in customer consolidation. Additionally, the company lacks an integrated costing system to support customer program pricing quotation that contributed significant losses causing the lender to recall on multiple loans. The company had solid operation structure with loyal and experienced personnel but lack the management leadership. With the inexperience management, the company lacks the the strategy in addressing production under-capacity and excessive overhead burden that stifle working capital to satisfy any conventional lender to support the continuation of the business.

Analysis of Alternatives:

1. Continue as is with struggling day to day in dealing with workforce, customers, and vendors impacting by the financial uncertainty and cash flow pressure.
2. Seek the various serious option to either file bankruptcy, scale down business, or a complimentary strategic buyer.
3. Engage with outsource consulting partner(s) to provide hands-on strategic financial and management turnaround experience to develop a plan to directly communicate with lenders, customers, and vendors to rebuild confidence in allowing the company time to execute necessary actions.

Recommended Solution: Hire outsourced financial CFO and CEO to seek and develop various options to
address the profitability and lender pressure.

Implementation: To quickly provide stability to the operation with the evaluation of management personnel to establish a discipline structure and control in developing accountability to focus in refining the 3 key functions of their business: Sales, Operation, and Finance. Our approach is to focus on Process, System, and People to triangulate the synergy in delivering incremental progress and improvement by defining the 20% efforts that provide 80% impactful results.

1. Solidify financial management report and analysis in providing manufacturing costs components detailing the direct labor, material, and overhead burden rate to identify the critical core driver that overtime deteriorate margin by customer and products to either eliminate or renegotiate pricing.
2. Establish a 12-month detail cash flow planning with a weekly update to adjust all necessary expenses and payment to customer collection. Develop an open communication with all major vendors with payment plan and request extended term to support the immediate turnaround. Create a proactive customer collection process to reduce over 30 days by offering payment term and plan installing a late payment penalty and interest.
3. Evaluate all personnel performance to measure against sales & production volume to identify under performer to either upgrade or promote leaders in driving changes with process redesigning to eliminate redundancies.
4. Develop a broad plan in reaching out to conventional & short-term lenders to address the immediate request from current lender to exit and paid in full of all loans. Approach every lender with a solid management plan in addressing revenue delivery, manufacturing cost management, operating cost control, equipment utilization, and personnel training and development.

Results: Our deliberate and focus approach to Process, System, and People to build confidence with internal workforce and outside partners to participate in the turnaround plan. Within 12 months of our engagement with a management consultant partner, the company delivered a positive NI with EBITDA of multi million versus significant losses in prior year and before. The company financial projection for the next 3 years is healthy with a stable sales growth, Net Income of 10% and EBITDA growth of minimum 20%. The company was able to refinance out the current lender with a short-term bridge lender within 6 months to restructure the business equipment and LOC debt. With the success of the business demonstrating solid sales and control costs to plan, the company was successful after 12 months to refinance the bridge lender to a normal cost conventional lender to support and grow the business back to health. With the emphasis of Process, System, and People, the company revamp key areas of each department to develop clear Process and then strengthen it by incorporating the System to deliver consistent results that allow People to perform effectively and efficiently throughout the company in delivering an ‘extraordinary’ result.