Phase I: Why is this Company Losing Money Despite Revenue Growth?

Situation

A $20 million custom parts manufacturer serving OEMs had been losing money despite growing revenues. Its frustrated owner hired Platinum Group to conduct an “opportunity evaluation” to uncover root causes and make recommendations. Platinum’s team approach examined the business from different angles — financial, operational, sales/marketing — and provided a strategic analysis within three weeks of key changes needed to be made to begin recovery efforts.

Challenges

• A top-heavy organizational structure was isolated from operations, which resulted in inadequate coordination between sales, manufacturing, engineering, and customers.
• Production was failing to meet customer standards for quality and ontime delivery, which resulted in poor ratings with major accounts.

Solution

A Platinum consultant was named COO/general manager to guide significant changes within the company’s operating structure. The topdown, decision-making was eliminated, which improved the coordination of all functions. The restructuring established the two manufacturing plants as separate business units, called Profit Centers, with clearly established controls and procedures. Each Profit Center included its own sales, engineering and operating functions, which improved the “disconnect” among functions. Both Profit Centers became supported by one small Service Center for accounting, finance, information systems, and benefits. Since quality and timeliness were dependent on capable, conscientious operators, a focus on upgrading and training the workforce increased the number of experienced employees in production.With improved production standards, Platinum assisted the Profit Center team to develop new pricing procedures and new business development focus aimed at the unique needs of high-end customers.

Results

In less than one year, profits were improved by more than $1 million through the newly streamlined operations. The Profit Center teams are working more closely together and bidding more aggressively on higher value-add parts. The company is poised for 20 percent, profitable growth in 2006.