Successful turnaround was achieved through behavioural change and strengthening of management control system.
Background
The company, a global leader in the production of storage systems employing approximately 150 people, markets and sells products worldwide to both private consumers and business customers. For several years, the company fought rising losses. Operations were in need of comprehensive rationalisation and control instruments and management systems required strengthening.
Mantec was employed to drive this process of change.
Implementation
The project started with a preliminary study by Mantec, reviewing and analysing the whole company including the sales offices and subsidiaries in Europe over a three-week period. Based on this analysis, a number of subprojects were defined and the work of change started.
The key focus areas
- carrying out ABC analyses and calculations for customers and products (ie analysing the range of customers and products into groups which have different levels of significance, and which should be handled or controlled differently). Based on these analyses, both customers and products were consolidated, a process which increased the profit margin significantly;
- carrying out an analysis of suppliers and purchased material, as a result of which new contracts were negotiated and certain suppliers replaced. In addition, changes were made to material specifications;
- changing the organisational structure of the company, dramatically reducing both direct and indirect personnel costs, which had rapid positive cash flow effects; and
- implementing systems for operations control, which involved:
- installing, for the whole company, a target-based management system including structures for follow-up;
- installing an information system for marketing and sales; and
- developing a forecast model/ planning model including information structure.
The organisation’s motivation for change was supported by training in the form of theory and a number of workshops. Similarly, the company was able to take ownership of the change process, and secure continuous improvement, because project work was managed through a project team.
Results
The project resulted in lasting behavioural changes and implementation of a number of new systems and working methods. As a result, costs were reduced and income increased through:
- increased profit margin, based on consolidation of customers and products;
- reduced costs for material purchased and freight; and
- reduced costs for direct and indirect personnel.
The company achieved positive cash flow even before the project was completed. After its completion, the company was able to report a positive result for the first time in several years.
