CASE
STUDY 5 Industry: Manufacturer-Residential Wood Windows Size: 220 employees; 300,000 sq. ft.
facility Entity: Non-public corporation within a holding
company. Situation: $1.5 million in losses over
previous 5 years; $235,000 loss in current year. Findings: Virtually no management team. Inventory and cost systems
non-existent. Unlimited product
offerings and prices. 6% gross profit margins. No defined shipping
schedule. No control over credit or
collections. Poor cash flow and irate
suppliers. Action: Restructured management team. Standardized product line,
reducing product offerings, simplifying manufacturing, and decreasing
inventories. Reduced cut stock from 144
different rip widths to 22 rip widths. Reduced manufacturing
throughput from 8 weeks to 3 weeks. Implemented a cost system. Simplified pricing. Implemented an MRP system
utilizing “pseudo” end component levels to forecast sales, manufacturing, and
material requirements. Results: Reduced labor force 33% while
maintaining production volumes, and decreasing inventories. Doubled gross profit
margins within 12 months. Achieved break-even the
next year. There after, consistently achieved 15.5% pretax
profit margins while growing sales to
$150 million. |