High investments, a slump in sales due to coronavirus and raw material management had pushed an automotive supplier for mechatronic assemblies to its limits. The company engaged the interim manager as interim CRO to stabilize the financial situation by optimizing working capital and to quickly ease the critical liquidity bottleneck.
Company severely weakened financially by coronavirus and chip shortage
The tool design, toolmaking, metalworking, automated plastics processing and assembly company had invested heavily in production expansions shortly before the outbreak of the coronavirus pandemic and was therefore financially weakened. The slump in sales caused by coronavirus and the faltering supply of microchips to the automotive industry, as well as rising prices for raw materials and energy, exacerbated the situation and posed a massive threat to the company's financial position.
Rapid process analysis to optimize working capital and secure liquidity
As part of the initial analysis, the interim manager worked with the Finance & Controlling team to gain a comprehensive overview of the current liquidity situation, the earnings situation and the cost structure. From these results, he derived a quickly effective Profit & Cash Improvement Program (PCIP), which focused in particular on consistent inventory management, the reduction of working capital and rapid cost reduction.
This was achieved, among other things, by the interim manager significantly reducing lead times and ranges of high-quality materials. He eliminated excessive safety stocks and lead times across the entire supply chain. This inventory reduction generated additional liquidity of €2 million within 6 months.
Stabilizing liquidity and improving the equity ratio
After optimizing inventory management, the interim manager focused on establishing reliable liquidity planning, including a consistent dunning process. Together with the CFO & Sales, it was possible to collect around €1 million in overdue receivables in the short term.
Revenue analysis & development of cost break-downs for price renegotiations
Analysis of the contribution margin revealed that the increase in sales revenue had not kept pace with the inflation-related increase in the cost of goods sold. In addition, the company had not responded to customers' significant reductions in unit sales - and had even granted further discounts. This resulted in a 20% loss of revenue compared to the previous year. In order to compensate for this loss, he developed reliable cost break-downs as a basis for discussions with customers. In tough negotiations, he was able to realize significant price increases of more than €2 million based on these comprehensible calculations.
Operational excellence: major value contribution through lean management and kaizen
A review of key performance indicators revealed considerable start-up and OEE losses as well as significant inefficiencies in the operational business units. Together with the project teams, the interim manager identified significant optimization potential. Improved coordination and regular on-site coordination of the cross-divisional project teams alone significantly reduced uncalculated start-up costs.
In another sub-project, the interim manager optimized the Overall Equipment Effectiveness (OEE). He introduced regular Kaizen meetings/projects within the production units and sharpened organizational responsibility. The OEE stabilized within a few weeks and production performance also improved. As part of further optimization measures, manufacturing and rework costs as well as costs for machine and tool maintenance and repair were significantly reduced.
Overhead streamlining significantly increases plant productivity
In parallel to the production optimization, the interim manager put the structures in overhead and administration to the test. He eliminated duplication in project management and quality assurance. This streamlining increased the operational plant performance (OPP) of the production plant.
Result: Liquidity secured - EBIT increased by €3 million/a
After 12 months, the interim manager successfully completed the mandate. Liquidity is secured. With an EBIT increase of €3 million per year, the company has significantly more leeway to successfully master the challenges in the automotive industry.
The confidence of lenders and banks has been regained and secured. Thanks to this positive company development, the first OEM order was also secured.
