A “Made in America”

Furniture Manufacturer

RAS Management was engaged by a private equity firm with a portfolio company that was generating average monthly losses of $1 million.  The equity sponsor had unsuccessfully attempted to work with company management to effectuate a turn-around plan, and initially engaged RAS to prepare and execute a liquidation plan for this 20 year old company with 350 employees and annual revenues of $90 million.

After performing a review of the company and developing a liquidation strategy that indicated a projected loss to the equity sponsor of some $20 million, RAS recommended an alternative “turn around” solution to mitigate the projected loss to the equity sponsor. The turn around plan identified numerous process improvements and opportunities for improvement that immediately mitigated, and over a window of time eliminated recurring monthly losses and led to profitable operations over a three-year period.  Following the successful “turn-around”, the equity sponsor was able to sell the portfolio business and generate a profit on its total investment of more than $20 million - a substantial improvement versus its expectations of only three year earlier.  

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As might be expected, the turnaround process included the identification of many different challenges that required the development of solutions.

CHALLENGES

• Stiff competition with low-cost offshore manufacturers

• Rural physical plant made it difficult to recruit a cost-effective work force due to the commute and lack of public transportation

• 60% of starting inventory was classified as excess and obsolete raw materials

• Excess number of SKUs with low sales per SKU

• Ineffective purchasing and manufacturing systems

• Lack of warehouse locator system

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SOLUTIONS

• Identify sales, marketing and manufacturing plan for excess and obsolete raw materials that provided significant working capital through the turn around period

• Reduce the number of groups/SKUs by eliminating the variety of alternatives in all categories

• Enforce fulfillment of customer purchase orders to eliminate unsold merchandise

• Reduce initial purchases and implement reorder processes for imported raw material

• Implement purchasing and manufacturing processes linked to upcoming sales orders

• Implementation of a warehouse locator system oriented to the management of high velocity items