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.
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.