IPA Business Case Study

Case Study:

Recovering Business Value

Who:

Founded in 1946 by three individuals, the company is a third generation aluminum anodizing company that specializes in low tolerance and high quality anodizing. It is a C Corporation union shop that runs 1.5 shifts with a client base in the Midwest region. Before IPA, their annual volume was reported at $2.5 million.

Challenge:

Although the owners had a tremendous amount of technical skill, they fell short on the business management skills. The challenges they faced had never been fully addressed or remedied since the company was founded. Other than some computerization and technological advances, the business had been managed very much the same as their fathers and grandfather did. The two owner-partners were at odds with each other and had communication issues between them. This affected employee morale and productivity, which declined further with a lack of accountability. Additionally, there were no concentrated sales efforts. It had became apparent that they needed buy-sell agreements and exit strategies between them as well, which is what IPA addressed.

Analysis:

Financial controls: In the past four years, the company performed at breakeven, losing money some years and only gaining it back in subsequent years. Substantial net profit had not been attained. They had not analyzed break-even, so it was not used as a tool in making management decisions. They also needed to have an accurate calculation for overhead to be certain estimating was done correctly. Production costs were not measured; therefore they could not be controlled.

Cash Management Systems: Consistent cash flow had previously been a major obstacle in the daily operation which resulted in increased frustration and stress for the owners. At times, both of them were forced to forego their salaries in order to keep the business running.

Business performance planning and monitoring: Accountability among key people was almost non-existent. Their roles were not defined and frequently overlapped. Performance assessments were not conducted and employees were not aware of what improvements were needed. Communication was lacking at all levels of the organization.

Expand Customer Base and Increase Sales: Sales were stagnant and sales efforts were unfocused and limited. They needed to expand their customer base, products and services.

Results:

Upon completion of the project, the client reported that our services have been a life changing experience. Their enthusiasm in implementing the strategies, redefining internal operations and the management of the business was an exceptional experience. Currently, the savings and improvements have a value estimated at more than $1,463,000.

The financial controls that were established include a labor burden rate for production workers while ensuring each job was profitable. We also implemented a daily tracking report to identify the profitability of each job.

IPA also improved their chart of accounts to better show the relationship of profits by profit center. In looking at the three profit centers for the business, we created a profit and loss statement to examine the profitability of each operation. It was determined that some profit centers were not making their minimum mandatory profit margins and recommendations were made to improve efficiency and productivity.

After completing the analysis, the information was used to complete the new pricing tools. The pricing tool allows the company to capture business it is currently losing to competitors, as well as develop a pricing model that will generate new sales for the company. The new pricing model has enabled the implementation of a very successful and comprehensive sales strategy.

During the project, the enhanced pricing tool was used to quote a competitive job with a new customer. The company won the sale and received a commitment for a $200,000 order. The new customer stated that the pricing and quality of work were key factors in the sale. Pricing tools are now being used to obtain a considerable amount of additional business from established customers.

Resolving production and productivity issues were an on-going part of this project. IPA created a model to standardize job operations for repeat customers, thereby increasing quality and efficiency. This production management system allows for daily production flash reports and storing information needed to standardize procedures and provides multiple users with the ability to know what production is scheduled. This information allows the production managers to communicate their customer specifications more consistently and better manage timelines with a focus on meeting or beating their customer’s turnaround time. It also provides financial managers with information regarding cash flow and revenue.

By having the ability to track employee productivity, IPA was able to develop an evaluation system for employees and managers. This helped align goals and expectations to improve employee morale and productivity. An incentive program was created to provide increased profit for the company which results in higher pay and morale in the workforce.

Finally, IPA developed and implemented a comprehensive recruiting and training program for all classes of employees and management. This was done to add value to the organization by providing consistent expectations and delivery of information. By using a standardized hiring and training approach, it ensured that each employee hired has the maximum opportunity to excel and attain their personal and company goals.

"IPA’s recent management support program has been the most exceptional experience that I have witnessed in my company history. The information sup­plied through the last 3+ months has been extraordinary life and company changing experience. Our consultant was extremely knowledgeable and intelligent. His advice, tools and overall support to our company has definitely made a positive change in the future of our com­pany. His outlook and expertise in all facets of how a successful business should be run were right on target every time. With the tools that have been supplied to us I have no doubt that we are on the road to a positive future for this third generation ownership. I have nothing but praise for IPA and the consultants."