A privately-owned Injection Molded Plastics Manufacturer was on probation with multiple clients and mandated to meet with their senior lender on a weekly basis.
The company experienced a significant decline in sales, dropping by 24% year over year. This was further compounded by having to write off inventory equivalent to 16% of sales. Several major customers were adversely affected by missed shipments and they ultimately lost a key customer due to financial performance. Large cash flow deficits were projected for the coming year and the company was running out of working capital.
Cascade Partners’ Performance Improvement Team was enlisted to help the company implement a 30-Day Plan, focused on immediately cutting costs and improving cash flow. We also implemented a 13-week cash flow model. After that, we moved on to a 100-Day Plan to improve profitability and cash flow.
To monitor and improve performance, we developed five daily key process indicators (KPIs). We also introduced three processes and metrics to help manage inventory and ensure timely delivery to customers. These include days on hand, on-time delivery to the warehouse, and on-time shipping.
To help forecast financial results for the coming month, we implemented a monthly sales and operations planning (S&OP) process. Finally, we set up a Management Advisory Board that meets monthly to address major strategic and financial issues.
The Cascade Advantage
Our client achieved a remarkable turnaround by generating positive cash flow, reinforcing its balance sheet, and enhancing its operations. Despite facing a 27% sales reduction, the company still garnered its first profit in two years by implementing various cost-cutting measures, such as reducing labor, manufacturing overhead, and SG&A by 24.4%. Moreover, our team was able to significantly improve their delivery performance to an impressive 99% and lower their inventory by 26.7% with minimal write-offs. This progress affords management greater predictability in terms of financial results. They can also now make real-time adjustments to operations, averting future after-the-fact surprises. With the senior lender’s renewed confidence in management, our client continues to stand strong even through the recession.