MetaExpert Brings Operating Cash Flow Back To Positive While Doubling Revenue in Under a Year

Situation

A manufacturing company serving the automotive and consumer industries observed a revenue stagnation for over 2 years. The company mass-produces stamped and machined products as well as high-precision tooling such as stamping dies and injection molds. For more than two years the organization wasn’t successful in increasing the net sales for either of the two divisions, manufacturing nor tooling. The operating cash-flow became negative, overstressing the financial performance to the point of a mere day-to-day survival.

Actions

  • MetaExpert / Kbx Consultant Marco was brought on to assess the situation and found the initial diagnosis pointed towards an inconsistent costing activity along with a disconnect between Sales, Operations and Finances from quotation to new project implementation or delivery (tooling).
  • The problem was also visible at the managerial level where daily emergencies tampered with strategic and tactical deployment to improve the situation.
  • From an operational standpoint, OEE at the production floor was below 40%, while Tool Room carried with it 102 inventory days and a delivery delay in more than 50% of the projects, with more than 35 days of delay, in average.
  • The first step was to improve the balance sheet position by focusing on excess and obsolete inventory, along with a tooling construction process streamline, allowing the organization to deliver and collect 85% of the backlog 12 weeks.
  • Next, the organization focused on developing a consistent and correct costing system that would provide a competitive and feasible offer in a timely manner.
  • Then, a whole New Projects Introduction process was developed and implemented that focused on 3 key points: effective planning, lean planning from the quotation process and effective project control.
  • Finally, negotiations with key customers and financial institutions allowed a successful implementation of factoring, improving significantly the cash conversion cycle.

Results

  • Mass-production revenue doubled, with gross margins 45% better than the average the company observed prior to the intervention
  • Tooling revenue increased 52%
  • Inventory days decreased 32% and 71% at the production floor and Tool Room, respectively
  • Operating cash-flow went back to positive, allowing the organization to normalize the short term situation in less than 1 year.

Return on Investment

MetaExpert/Kbx Consultant Marco achieved a net profit increase of more than 35%, improved EVA to nearly 50% compared to the previous 3-year period.

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