Identifying opportunities for profit improvement in a private equity owned business which designs, procures and distributes high end products to businesses and consumers.
Our brief was to answer three questions:
- How profitable could the business be if it were the optimal size for the forecasted annual revenue? This involved examining the cost base and considering options for order fulfilment, including outsourcing to a third-party and relocating to a more cost-effective site.
- Should the business be sized to a lower revenue by exiting accounts that have the weakest performance? The optimised cost base described above would change account profitability and therefore it would be sensible to review the effect on profit and return on capital employed (ROCE) if any unprofitable accounts were closed, possibly by increasing the price at renewal.
- If the business were to close what would the net position be? This required a view on the exceptional costs and the amount of cash that could be recovered from stock.
As part of answering the first two questions and modelling the potential profitability we reviewed the required numbers of both direct and overhead staff .
When the brief was first discussed it was assumed that we would spend a portion of the assignment on the site, meeting people, observing and analysing the ways of working in the warehouse and assessing productivity levels. The lockdown restrictions meant that we had to devise new ways of approaching this type of work and we quickly determined that there is actually very little that can’t be done remotely with co-operation and lateral thinking.
Observations on the layout of the operations, the way staff worked and even the operation of machinery were all carried out through a mobile phone video stream. Data analyses and detailed daily discussions over Microsoft Teams provided an effective solution to the other parts of the puzzle and accessibility of people was often better than when trying to arrange face to face meetings.
Although we always stress the collaborative nature of what we do, working remotely created an environment where this was even more evident. The results were agreed with very little dispute and were presented to the owners as a joint view. Action plans to realise the benefits could then be constructed and approved very quickly.