Tag Archive: private equity

The Resilient Supply Chain: Does Supplier Negotiation Work?

October 29th, 2018

In today’s Amazonian environment, it is quite clear that the customer’s experience is #1.  It doesn’t matter what issues you have.  If you cannot make sure that your product or service is delivered on-time with a value-add at a reasonable price, you will lose the business.  

The Squeeze
In talking with a group of aerospace CEOs who are being squeezed between the Tier 1/2 suppliers (those who supply Boeing and Airbus with plane ready parts) and their suppliers who are metals suppliers (mills/metals service centers) and outside processors, it is a tough position to hold!  However, just as Mirna Elnar, CEO of Acrua Spas said in our supply chain resiliency video series, there is always a solution when you think innovation.

The Win-Win
In this example, many of the suggested solutions from executives and procurement resources alike were to find opportunities to redesign/improve the product and process to achieve a “win” for the Tier 1/2 suppliers (improved manufacturability with better efficiencies and/or less scrap, less materials while maintaining specs/ performance, having the “right” inventory in the “right” place at the “right” time etc.) while also achieving a “win” for the CEO (better margins/ better cash flow) and ideally a “win” for their suppliers (more predictable demand, etc.).  A win-win-win is achievable if you look hard enough.

A Dose of Reality
This relates to a situation I found myself in while VP of Operations & Supply Chain for a mid-market manufacturer.  We found private-equity backers and were able to make cash flow by the “skin of our teeth”. We even were able to convince suppliers to take a haircut.  So far, so good. Then, oil and gas prices rose which impacted 70% of our material cost which impacted 70% of overall cost. NOT good. Also, we found that our product lines were all mixed up (which ones cost less to produce vs. the sales price for various customer segments) because we had recently merged three companies into one.  Also NOT good.

Our customers were a bit angry about service issues that arose when we cut over to a new system and merged the three businesses into one.  Also NOT good. And the largest segment of the business hadn’t updated products in years because they planned to sell and were desperate need of an upgrade to grow sales.  A fact but also NOT good. Lastly, our product is light but fluffy (which makes it larger in size) which carries a high transportation cost. NOT good either. But we had good suppliers and an innovative and committed team.  GOOD! So, how did we turn this into a “win-win-win”?

We decided to kick off a redesign project to find a way to straighten out the product tiers, improve performance of the product, reduce the cost of the product and reduce the freight cost associated with the product to boot.  A bit of a tall order? Yes, but a challenge as well!

We were successful in achieving ALL of these objectives by turning supplier negotiation on its head.  Instead of demanding price concessions, we partnered, provided upfront information on our objectives (including cost reduction objectives), collaborated on the design of new/improved materials, redesigned products and packaging, collaborated with customers to make sure we aligned with their needs and priorities, collaborated with equipment suppliers to put it all together and turned supplier negotiation into customer collaboration. 

The Result? We achieved a win for our customers, our business (and therefore our private-equity backers) as well as our suppliers.  There are too many people to thank but a quick shout out to Bill Weber, Keith White and Rick Finlayson seems appropriate.

Are you stuck in thinking about cost concessions or are you looking for the “win-win-win”?



Gaining New Ideas to Increase Business Value

August 8th, 2018

Every executive we work with is interested in increasing the value of the business.  Whether a small closely-held business with an owner who might want to sell the business or exit with an ESOP, a private-equity backed company aiming to achieve the ideal exit strategy per the private equity agreement or a large, complex organization working to increase shareholder value, increasing the value of the business remains a unanimous top priority.

Understanding this objective is quite different from fulfilling it.  There is a reason the most successful businesses have teams of people rather than one person who has to come up with every idea – it is certainly more sustainable!  

So, how can we encourage these ideas? Here are several ways that we’ve seen success achieved consistently over 25+ years in both the corporate and the consulting world with manufacturers and distributors.

  1. Engage your employees – Definitely one of the “easier said than done” items; however, it is also one of the most consistently successful.  As the Gallop polls show, those companies with a higher percentage of engaged employees significantly outperform the rest.
  2. Involve your customers – Who can better than your customers to generate ideas that will ensure a superior customer experience while increasing the value of the company?  Don’t just go to your top 10 customers in volume. Think about your long-term customers. It can also be worth it to collaborate with customers on the brink of being an unprofitable and prompt ideas to turn it around or end the relationship on a “good note”.  You never know what might happen. We’ve seen dramatic turnarounds, just as often as we’ve seen the rest of the company improve when getting rid of the “rotten apple customer”.
  3. Collaborate with your suppliers – Aside from your customers, who else might have a substantial impact on your performance?  Your suppliers! If you can devise new win-win approaches together, imagine the possibilities.  For example, when I was a VP of Operations and Supply Chain for a mid-market manufacturer, we collaborated with suppliers to develop a new material so that we could reduce our usage (increasing our profit) and provide a benefit to our customers (better performance/ higher value for them).  We became a closer partner with our supplier and grew each of our businesses and profits while enhancing the value to our mutual customer. A win-win-win.
  4. Ask colleagues outside of your area of expertise – Just because your colleague is in a different function doesn’t mean he/she won’t have a great idea.  Take the time to explain an important project to related colleagues outside of the project or your area of expertise.   Ask for their thoughts, watch-outs and the like. You never know where the next great idea will come from.
  5. Consult with experts / advisors – Attend trade association meetings.  Dig into industry journals. Ask questions of LinkedIn groups. Pursue alumni colleagues.  Consult with an advisor, consultant or financial expert. Join a peer group.  

There is no doubt that the most successful executives utilize all of these techniques to make sure they generate a seemingly never-ending stream of ideas to increase the value of their business.  Set aside time on a daily, weekly and monthly basis to priorities these activities.  Do not expect an immediate payoff.  However, if you are consistent, you’ll find success one day down-the-road.  After all, it may only that one idea to make a significant impact!

 



Are You Achieving Scalable, Profitable Growth?

May 9th, 2018

When we look back over the last 13 years of consulting with closely-held building products manufacturers to medium, private-equity backed food and beverage firms to large aerospace corporations, every single client has one goal in common – achieving scalable, profitable growth.  It sounds somewhat easy but is far from simple in reality.

PROJECTS THAT ADDRESS SCALABLE, PROFITABLE GROWTH

in the last few years, these types of projects have been of particular interest – all of which spur this result.

  • MANAGING GROWTH – How to make sure the back end keeps up with growth – seamless execution of rapid growth is far more challenging (and exciting) than it appears.
  • OPERATIONS – How to scale operational processes to support elevated customer expectations on-time and on-margin targets.
  • SYSTEMS INFRASTRUCTURE – How to scale your systems infrastructure to support your customer experience without adding people and costs every step of the way.
  • TECHNOLOGY INFRASTRUCTURE – How to scale your technology infrastructure without going overboard and getting caught up in fads while losing your objective.
  • TALENT AND TRAINING – How to scale your people (skills and talent) to support growth – there are a myriad of topics ranging from training and education to cross-training and capacity planning to scale in the appropriate skill areas that will provide the largest impact.
  • SCALING MANUFACTURING CAPACITY – How to scale your manufacturing capacity to support growth – gaining a view in advance can go a LONG way to alleviating a world of service and cost issues down-the-line.
  • SCALING WAREHOUSE CAPACITY – How to scale your warehouse capacity to support growth without expanding into new buildings unless absolutely necessary – after all, warehouse space is at a BIG premium, if you can find it at all.
  • SCALING SUPPLY CHAIN – How to scale your supply chain to support growth – no matter how prepared and perfect your company, if your suppliers, trusted partners and other supply chain partners are left in the dust, you’ll falter quickly.  For example, lately, we’ve heard a lot of buzz about issues causing delays from China, ranging from unexpected pollution controls to government mandates to Chinese New Year.
  • SCALING YOUR CULTURE – How to scale your culture as you transition from a small to medium-size company, medium to large and so on.  It is easy to get stuck in “no man’s land” – NOT where anyone wants to be!
  • And more….

Our best clients are thinking about each of these topics on a frequent basis.  In today’s Amazon-impacted marketplace, you don’t have a second chance. Instead, you’ll see your competition speeding by….

What is your plan to achieve scalable, profitable growth?

 



Interested in Private Equity?

October 18th, 2011

What is a CFO’s job like in private equity – Exciting & exhausting! (CFO Magazine)

I thought this was so appropriate to what I’ve seen over the years, and so I wanted to share and comment. I felt the same way as a VP of Operations in private equity, and I know many Executives who have expressed similar sentiments.

Never-ending requests for profit bridges, analyses, endless documents on proposed capital spending, questions about results, questions on risks and rewards, etc. I found that although we spent countless hours on these sorts of requests, there was an upside as well – we ended up with a razor-sharp focus on our business.

Of course, as with everything, there can be excellent private equity partners or horrific private equity partners – I’ve seen both. The good can end up with “big risk, big payoff”, and the worst…….it’s ugly.