Restructuring

Restructuring and other Profitability Improvement and Cost Reduction Opportunities:

When market volume declines or technology changes, a company often must face the fact that it is no longer a low cost producer or distributor. In addition, the company may have significant excess capacity. To deal with these issues, we assist management in understanding the profitability and cash flows from their various operations, and the incremental costs and profitability of customers and products. Plant and other operating costs are compared to industry benchmarks to determine whether the problem is with cost or pricing or both. If plant consolidation is necessary, we assist with the analysis of which plant(s) to close, capital requirements in the remaining plants to absorb the volume, revised staffing and distribution cost optimization. Additionally, analysis may be conducted to identify and shed unprofitable business.

Plant consolidation involves the closing of one or more facilities and the consolidation of production and/or distribution operations into the remaining facilities. Consequently, the available capacity of the remaining facilities must be carefully analyzed to insure that the required volume will fit. In addition to production capacity, we also look at receiving, raw material storage, finished product storage, load out capability and systems. All must be able to handle the recurring peak loads that will flow through the facility. We work as a team with the client¹s staff to create an estimate of additional costs that will be incurred when the facilities are closed, and compare it to the savings. Costs include capital and staffing requirements in the remaining facilities, maintenance costs at the closed facility, and increased distribution costs. If the capital expenditures required for the remaining facilities to absorb all of the volume from the closed facility are high, it may be desirable, and even more profitable, to eliminate some very low or negative margin customers. To examine this possibility, we perform a detailed customer and product profitability analysis which looks at incremental costs from production all the way through to delivery. The result may eliminate enough volume so that required capital costs for consolidation are minimal.

Cost reductions also may be found in corporate staffing, sales and customer service, as well as distribution, vehicle ownership and maintenance versus lease costs.