Operational Inefficiencies Hurt Cash Flow

TypeFresh Pair of Eyes
Quick Facts$50 million manufacturer of aluminum windows("WindowCo") with one plant that supplies 12 regional warehouse/distribution centers. Majority owned by two private equity groups.
ChallengesWindowCo was founded by two entrepreneurs. Over the course of many years, the company experienced steady growth in an expanding geographical region of the US. To help fund this growth, the company used a combination of outside equity, mezzanine and senior debt.

However, as the velocity of growth accelerated, the company's operational processes, manufactering operations, inventory controls and the overall management of working capital did not keep pace. The combination of too much complexity and poor controls created a cash crunch for the business.
ApproachMcHugh & Company was retained to conduct an operation review of the company's inventory policies and its 12 branch warehouse facilities throughout the state. The objectives were to reduce inventory investment, enhance cash flow, reduce operational costs, upgrade business processes, and improve customer service and quality.
ResolutionWindowCo had become a large company that was still being managed with outmoded methods and systems. Our project set in motion a number of action steps in key areas:
  • flush the excess inventory out of each branch location
  • improve the design and flow of older warehouses to reduce operational contraints
  • create and enforce order rules to restrict the buildup of excess inventory
  • overhaul product engineering to tighten up bills of material by using more common parts and subassemblies
  • create a centralized customer service organization run with a consistent set of policies
  • emphasize quality and change the culture: expand employees' thinking to include material handling/damage, detailed manufacturing, scrap
  • rationalize the entire product line: drop outmoded products and accelerate the development of new windows to meet market needs
  • install a new generation of information systems to cover sales force automation, order entry and manufacturing controls
Links to the other fresh pair of eyes cases:
  1. Restoring Profitability in a Business Unit
  2. A Dilemma – What’s Causing the Operating Losses?

To view a list of all McHugh & Company Case Studies, click here.