The operation was losing £1 million per month and the financial reports were not reliable or reflective of what was happening within the operation. Whilst the business had a strong workforce, mismanagement and a lack of coordination was clear.
Although many of the issues could be seen by walking around the business, before any changes or improvements could be made, 1-2 weeks was spent conducting a deep dive into financial and operational data.
Previous management reports were not reliable enough to provide any guidance on decisions or actions that needed to be taken, so a restructured P&L, balance sheet and operational KPI’s needed to be generated.
From this initial data it was clear what immediate actions needed to taken in order to start to stabilise the business both financially and operationally.
There were two sides to the operation:
- Components Manufactured on site.
- Components Imported from Head Office in Asia.
Each of these had different cost structures and this was not reflected in any balance sheets or P&L. Within the manufacturing areas operations and costs were mixed and were not displayed as separate entities. There was no clear understanding of process flow of either product group and inventory control was non-existent.
In order to start to understand the manufacturing process and regain control of inventory and cost were separated and product groups created and split into 2 business units. Actions taken were;
- Physically separating the product groups into different areas allowing for the finance department to generate two separate Balance Sheet & P&L’s.
- We were able to consolidate both of these for an overall business review.
- Employees were assigned to each business units with a supporting supervisory structure.
- A common set of KPI’s were initiated which each business unit were measured against.
- These actions resulted in the stabilisation of operations and started to provide cleat and consistent data on business unit performance. Regular business meetings were held on a daily, weekly and monthly basis. This communication produced a culture of empowerment and responsibility amongst employees motivating them to take control of daily issues that needed to addressed and rectified.
Over a period of 3 to 4 months the real issues of as to why the business became loss making were realised. There were two main reasons for this:
- Design and costing of projects by the sales department when tendering for business.
- Operational efficiency including:
- Archaic processes and equipment.
- Flawed business structure.
- Lack of control and management of employees.
- Poor product quality for each product group.
In addressing each of these headline areas, the business became stable and financially broke even within a 10-month timeframe.Back to Case Studies