We came to this manufacturer, located in the South East, with a mandate to completely reorganize the company, build structure and create a strategic plan to guide their growth in the coming decade. After our arrival we found that in addition to those stated goals we had also to address the buy out of dissident shareholders, the buy out of foreign investors and the disengagement from unethical and ineffective investment bankers.
Upon beginning the consulting process we found as follows:
There were other problems within the organization but these highlight the conditions we found. Obviously, problems of this magnitude required a substantial project to effect a correction.
The first several weeks were a blur of activity as we started finding out what our true condition was. However, first among several crucial steps was establishing effective communications and ensuring that we always knew the truth about the company's position. We immediately got all of top management to sit down weekly and share all crucial information about operations in their departments and what may have happened that impacted other areas of the business. This weekly meeting was highly structured and we provided the agenda and reporting mechanisms to start them on the communications process.
The second crucial step was eliminating the backlog of late orders. We took several steps to achieve this goal. First, we hired adequate personnel. Second, we created a scheduling grid so that we knew the position of every order at all times and knew whether it would be produced in a timely fashion. Third, we established standards for production so that each production department knew how much labor or machine time it had to produce a machine. Additionally we fired the production manager, because he was a liar and elevated another man with less talent and more integrity. The initial result of our steps was improvement of on time deliveries but an increase in labor costs and overtime. In the final analysis, throughput has been increased by 40%, labor costs have been reduced and it has been over four months since we have had any overtime in a production department.
As a result of management's efforts and the changes we affected the company last year increased revenues by over 20% and went from a $1,000,000 loss to a $300,000 profit. In the current year we are on track to increase revenues by 30% and increase the bottom line net to over $1,000,000.
In the current year we have made substantial change to the sales and marketing structure with more changes to take place after the fiscal year end. We have created a new recurring revenue source from the technology of our rehabilitation equipment. This is being accomplished through joint venturing with orthopedic clinics and preventive medicine organizations to equip and establish protocols for effective rehabilitation and prevention. The first of these centers is in place and operating very profitably.
We have severed the company's relationship with the predatory investment bankers and they are in the position to raise the needed capital through traditional lending sources and negotiations are nearly complete to buy out the dissident shareholders and make substantial reduction in the foreign investment.
The cash management function has been brought completely under control. Currently the CEO and Controller sit together once per week and make decisions about inventory levels, working capital borrowing, forecasted cash inflows and capital needs for equipment or other long term use. Under this regime the company never uses any more costly working capital than is absolutely required.
We have currently worked with the client for over 1,500 hours and have achieved every objective we started after except the strategic planning goal. This means we are on target. An effective strategic plan will certainly require at least a year to develop. To begin with we were putting out fires and had a difficult time looking at our intermediate and long range goals. We currently have every manager examining their department and determining what resources they will realistically need to achieve our stated goals in revenue and profit. We currently are meeting with this client on a monthly basis to continue shaping their strategic plan and fine tuning the other procedures developed and installed.
After the changes we affected the CEO and Chairman of the Board, both minority shareholders, have been aggressively pursuing means to increase their stake in the company.