CS No. 041117 – Fortune 500 Corporation
A Fortune 500 Food Manufacturing Co located in Decatur Illinois.
Coaching a senior level management team in turning the struggling division into a highly profitable business.
This company had a $50 million revenue division manufacturing specialty products for use in food products and for industrial applications. The division was administered as part of a $1 billion commodity products division. Manufacturing consisted of seven small production plants scattered across 6 states in isolated locations. The division was generating a mediocre $500,000 in operating income on $50 million in sales and had been stagnant for years.
The Predictable Future:
- No growth in sales or operating income for a period of years.
- Lack of leadership in establishing the direction for the business.
- Lack of capacity to launch new, high margin, specialty products.
- A need for capital investment to address the lack of capacity.
- A lack of communication between the manufacturing locations for capacity and talent allocation.
- The division would be shut down or sold off piecemeal for lack of return on invested capital.
The Breakthrough Targets:
- Identify and implement structural changes to the business and its management to improve profitability.
- Address the capacity issues.
- Establish a direction and management culture to allow the business to grow in the future.
The Action Plan:
- Established a management structure to run the business as a specialty business rather than as a commodity business.
- Modify the commodity division accounting system to break out the specialty division accounting separately, allowing the individual plant economic performance and product line profitability to be evaluated.
- Established each plant as a free standing profit center.
- Closed and sell one unprofitable plant.
- Changed out two of seven plant managers to instill new life and fresh ideas into the plants.
- Eliminated several unprofitable product lines which made capacity available.
- Eliminated the need for capital investment by using the now available capacity for new, high margin products that were waiting on the capital investment.
Over a period of 18 months of executive coaching, the division moved to an annual operating income of $5 million/year, up from $500,000/year.
The business culture was changed from running a commodity division of high volume, low margin manufacturing to a specialty culture of low volume, high performance, and high margin products.
The plants now ran as free standing profit centers but functioned as a team to allocate both personnel and production capacity across the division to maximize the profitability of the specialty division as a whole.Read more