In this case, the real case of a family business in the metal sector of 225 people and almost 100 years old is developed that after a few years of decline in margins -although with maintenance and even increased sales- finds itself with losses of approximately one 7% on your billing.
The starting situation
In this case, the real case of a family business in the metal sector of 225 people and almost 100 years old is developed that after a few years of decline in margins -although with maintenance and even increased sales- finds itself with losses of approximately one 7% on your billing.
After an analysis by the Management of the evolution of the results in recent years, it is identified that it must undertake a reorganization project at all levels to change the trend in the results.
To this end, a team of 3 consultants worked on the project for 9 months using the Improven Consultores methodology and achieving exceptional results:
- The company returned to profits after 9 months of starting the project. Savings of 1,500,000? quantifiable in the first year due to improvement in product and manufacturing processes. Consolidation of growth around 15% per year in sales in a profitable way. 45% reduction in customer delivery times, improving customer satisfaction by 22%. Cost reduction in purchases of 4.5% (in a horizon of 2 years) Increase of 2% in average sales prices (in a horizon of 15 months). Return on investment of the project in the order of weeks.improvement in staff satisfaction going from absenteeism of 13% to absenteeism of 4%.
In addition, some more qualitative results and more difficult to quantify are also detailed, although no less important:
- Clear strategy in the medium and long term that ensures the viability of the company. Definition of budget management that allows visibility of what happens in the company on a day-to-day basis as well as its future and the analysis of its reality. Change in the company culture by implementing a Management by Objectives policy. In the words of the General Management, «before the project we were unemployed and now we are a modern company». Change in the commercial culture of the company, understanding that «we must sell and not wait for them to buy from us « Thorough knowledge of the cost structure by families, products and customers, which allows correct decision-making. Development of two new innovative product lines with higher margins than the previous ones and which are proposed to be the future of the company. Definition of a family protocol that would provide the company with tools to foresee possible present and future family problems. Definition of an investment plan that will increase the competitiveness of the company in the medium term.
The company
The company is a family business in the metal-mechanical sector of 225 people and almost 100 years old.
The company has a turnover of around 20 million euros and 30% of its turnover is in international markets with different product lines, many of which are aimed at different markets.
The situation is that after a few years of declining margins - although with maintenance and even increased sales - it finds itself with losses of approximately 7% on its turnover.
After an analysis by the Management of the evolution of the results in recent years, it is identified that it must undertake a reorganization project at all levels to change the trend in the results.
The starting situation
After a diagnosis of the situation by the Improven Consultores team and based on the deep knowledge of the sector, the following improvement points are diagnosed:
- High production costs, around 11 percentage points higher than the industry average Totally oversized staff structure, around 10 percentage points Although it was growing at around 12% per year in turnover, profits were decreasing year after year year Lack of knowledge of profitability by customers, products and families. We worked with a direct cost structure developed by the finance department and that did not reflect the productive reality of the company due to the typical disconnection between production and the financial area. Poor commercial management that could be summarized in the phrase that the Director usually used General: «More than selling, they buy from us». Due to the lack of presence in the market,The pricing policy was not adequate and it was detected that -on average- they had prices 3 percentage points lower than their competitors for the same quality and service.The investment policy of recent years had not been correct, finding large investments in machinery and technology that had not been profitable and other areas of the company in which the need for investment was key to being profitable Lack of commitment and motivation on the part of the majority of the company's staff and especially with the production and which resulted in very low productivity (also promoted by a poorly planned and incomplete system of methods and times) as well as a high level of absenteeism (average absenteeism of 13%). Lack of results from the technical department,As well as the null dialogue between it and the commercial department, in the last 10 years had produced substantial improvements in the products, as well as that no new ones had been launched.There was a significant problem in the operations area since there was no Correct production planning, an element coupled with the lack of coordination with maintenance, quality and logistics meant that customer service was not all the good that customers demanded and also having a level of products in progress 45% higher than what The need for continuous improvement in production processes, either to reduce manufacturing costs or to adapt to ever-changing demand, was not considered.There was no strategic planning process - nor the corresponding associated budget management - with which the company "was not very clear about where it was going" and that caused it to enter businesses or products that were not profitable and generated a lot of confusion in general. All of this - and although it was not critical - the typical problems due to the family nature of the company were also added, which aggravated the points described above.
The proposed solution
The focus of this type of project is key to achieving the objectives set at the beginning of it, it is necessary to have a global vision of the problem to give it an appropriate solution.
Improven Consultores gives a global approach based on the four basic pillars of the organization:
The solution originates from the analysis of each of these areas and their critical position within the general problems of the company. Always maintaining cohesion between them during the evolution of the project, through the own Change Management methodology.
For the specific case that is being dealt with, taking into account the critical situation in which the company found itself, what came to be called the "Plan 10" was proposed due to being 10 main lines of action:
- Definition of basic strategic lines. Definition of a cost system to analyze profitability by customers, products and families. Launch of a cost reduction plan. Redefinition of the general organization of the company. Reorganization of the commercial area and definition of a commercial plan redefining the strategy, processes and people. Redefinition of the pricing policy. Improvement of the logistics process, purchasing, stock management, production and order management in order to improve customer service and reduce the inventory level. Analysis and definition of the information systems necessary to support the management.Implementation of a management control model and a culture of Management by Objectives. Definition of a methodology for launching new products. Change management plan and internal communication plan to change the cultural elements and to be able to implement all the changes that the project needed.
