The
Companies
Two competing promotional products manufacturers.
The
Problem
Both companies were unprofitable in a highly competitive and price-conscious
overall market, although their customer bases had little overlap.
Each was well known in its respective market segment. Both had
heavy debt and creditor problems. Both were equipment-heavy with
essentially the same equipment types. Both were forced to carry
heavy inventory in order to provide fast order fulfillment.
The
Solution
Physically combining the two operations eliminated tremendous
amounts of completely or partly duplicated fixed expenses and
operating inefficiencies: management, rent, inventory, insurance,
equipment and related maintenance, utilities, delivery vehicles,
telephone systems and base charges and other. Duplicated equipment
was sold and debt reduced; the newest and best was retained. Increased
production levels improved productivity and lowered variable costs,
providing faster deliveries and, when necessary, more competitive
pricing. Each market segment now could be sold products that previously
weren't available or had been bought and resold at low margins.
The best management and production people were retained. A lower
total inventory level better served the combined markets; the
sale of excess inventory produced substantial cash to reduce debt.
The
Result
Two companies that had significant losses were merged into a much
larger and more competitive instantly profitable one, producing
pre-tax profits of 10% of sales in the first year of combined
operations. Long term debt was eliminated.
Next
Case Study >>
