Restructuring Advisors

Manufacturing Company

Industry: Manufacturing
Size: $350 million annual
Region: Midwest based, National Scope
Expertise: Financial Restructuring

The Challenge

The parent company of this 1200 employee Midwest based manufacturing company put in place an initiative to improve cash flow, reduce inventories and enhance profit margins through a cost reduction campaign.

Our Actions

Jim Burritt, founder of Restructuring Advisors and colleagues completed an assessment of the business to identify opportunities and build an implementation plan that would provide the greatest results over the shortest period of time. The balance sheet was scoured for opportunities to pull cash out of the business without causing any harm to their operating efficiencies. An emphasis was placed on reducing days outstanding on receivables from 48 to 37. A similar effort was established to achieve a better balance in their payables department. An objective of increasing payable days from 33 to 51 days without loss of vendor support was established and monitored weekly for feedback and concern. Raw material and WIP inventories were reduced at 2 manufacturing locations. Finished goods inventory warehoused in 28 locations around the country were balanced allowing for quicker turns and better customer service.

Running on a concurrent schedule the team completed a process that mirrored the McKinsey AVA (Activity Value Analysis) program designed to balance human resources and budgets with the company’s strategic initiatives. The goal was to dramatically reduce or eliminate cost on support and staffing on legacy products and programs, but to do so in an organized and thoughtful manner.

The Results

The combined effect of the accounts receivable reduction and extended payable days combined to generate an annual savings of $3.7 million. The reductions and balancing of inventory produced an additional $2.9 million in the manufacturing operations and nearly $1.0 million through the warehouse locations. Results from the AVA program identified an additional $1.7 million in hard dollar savings with an expected benefit of $1.0 million in extraneous savings.