Marketing and sales deficiencies nearly scrapped a second-generation manufacturing facility.
The second-generation, precision component manufacturer was built through a combination of word of mouth and customer loyalty. Starting as a small family business, its volume increased rapidly and it grew into a mid-sized company of 100+ employees with an international reach. The company favored a hands-on approach, ignoring the need for formal training, Six Sigma process improvements, technological advances, and development of executive capacity.
The company had customer and industry concentrations. Nearly 80% of sales were concentrated in three core customers, serving a single industry – aerospace. Furthermore, over 60% of gross sales derived from a single customer. No competitive differentiators were developed or identified and the company’s brand was, at best, weakened. There was an overreliance on providing a commodity, with no drive to provide value-added services. In short – the company was no longer considered a value added supplier to their customers, instead of being an integral, collaborative supply chain component.
Customer relations was limited to responding – often late – to current customer’s request for quotes with minimal follow-up. The Company failed to acquire a single new customer over a two-year period. Diversification was an unknown concept. Outside sales reps were nonperforming and neglected. There was no dedicated internal sales and marketing team or plan – in fact, there was no sales or marketing period.
The 2008-2009 contraction in the Aerospace industry was a world-wide phenomenon. The Company was swept up in a broad and deep downturn that in many ways changed the industry. Without established processes for driving or responding to change; the impact of the industry contraction caused a 25% decline in sales and created other challenges associated with the global economy and the Company’s position within the Aerospace industry. The resulting impact of the Company’s failure to respond to the world economy has been declining operations performance, an increasingly heavy debt load and now a failure to meet the debt amortization requirements imposed by a Bank creditor.
Lakelet Advisory Group (“LAG”) was engaged as turnaround consultants by the creditors. LAG quickly assessed the challenges, focusing like a laser to successfully develop proven solutions.
Executive management was reorganized, putting charismatic, technically knowledgeable owners directly in charge of marketing and sales. LAG brought in its team of marketing professionals to educate the newly formed sales and marketing team. LAG spearheaded the development of a comprehensive marketing strategy, triaging solutions to realize an immediate 10% increase in sales. LAG immediately executed a plan to survey customers, win face-time with decision makers, revitalize a listless website, and develop brand recognition. Close tolerance precision machining and high quality finishing with on-time delivery was identified as customer-valued differentiators.
To address the delivery of on-time, professional presented job quotes, LAG assessed and re-engineered the quoting / bidding process. A capable team member with the requisite technical knowledge was provided training to take on the duties of quoting jobs. Simultaneously, LAG recruited each department manager to provide cost estimates for their respective area of responsibility. The residual benefits included reduced production setup times, job cost buy-in and entity-wide team building. LAG also developed a customized program to facilitate the collaborative quoting approach. The proprietarily developed program provided computational logic, quoting / CRM integration, and reporting and data management functionality on a shared platform accessible in real-time. The reassignment of duties and re-engineered process together with IT development successfully provided the dedicated resources to ensure accurate, timely, competitive bids in a professionally presented format.
Well positioned outside sales representatives were engaged in numerous other industries that required this highly processioned manufacturing of metal components. The strategy required supporting and incentiving exploring new markets and diversify the industries served, concentrating on high-margin sectors.
LAG’s team of financial experts developed a marketing budget and redirecting resources from inefficient processes to secure the funds needed to support the marketing strategy. Simultaneously, LAG leveraged its network of financial contacts to alleviate payment demand pressures while the company was rebuilding.
LAG’s cost accounting and operational specialists collaborated to overhaul costing methodologies to provide meaningful, realistic and competitive cost estimates. Work centers were identified by their ability to contribute to the profitability of the company. Specific operations and processes were evaluated and adapted to add value to the customer. High-volume, profitable jobs were targeted for aggressive sales while one-off, high cost jobs were appropriately bid or declined.
Sales immediately jumped by 10%, unprofitable work was reduced and the Company’s gross profit margin improved significantly. Within 30 days, outside sales began performing and request for quotes nearly doubled. The company overcame its industry concentration, expanding into healthcare and outdoor / recreational components. Value added service initiatives, including prototype development, resulted in long-term contracts for a number of new product lines. As a result, long-term purchase commitments increased by over half a million dollars.
A strong inside sales and marketing team was established to provide sustainable growth. Customer Relationship Management (CRM) successes combined with our marketing initiative increased customer contacts and repeat orders tenfold.
Internal processes and programs were successfully introduced resulting in retention and buy-in of the company’s highly skilled workforce. Organizational restructuring resulted in clear lines of responsibilities empowering all employees and managers to achieve organizational success. Inefficiencies and waste were drastically cut resulting in a 35% jump in successful bids.
LAG worked closely with the Company’s creditors, keeping them abreast of Company improvements. Lakelet’s reputation and past performance provided this creditor with strong assurance that the Company was on the right track. As a result, the creditors allowed the Company to refinance its debt, agreed to provide interest-only payments for one year, and provide the necessary LOC to address the next fiscal year’s working capital.
The Company was able to strengthen its financial position by capitalizing on introductions LAG provided, employing recommended best-practices and committing to turnaround management initiatives to salvage its business.