Restoring Profitability in a Business Unit

TypeFresh Pair of Eyes
Quick Facts$120 million distributor (“SupplyCo”) of commercial architectural, engineering, art, office, and framing supplies. Multi-location, privately held by original founders.
ChallengesOne of SupplyCo’s key divisions had been producing losses (after corporate overhead allocations) for a sustained period of time. The owners were considering selling the company, but wanted to identify the causes of the division’s poor financial performance and to implement changes that would bring the division back to profitability.
ApproachMcHugh & Company was retained to conduct a strategic and operational review of the wholesale division and make recommendations on how to grow its market share, fix its operational problems, and determine its long-term fit within the corporation. Working with a supportive management team from the division, we completed:
  • an extensive review of the people, organizational structure, and business processes
  • a comprehensive data analysis of the product lines, products, customers, and key working capital items
ResolutionThe unnecessary complexity of the product lines, products and customers was severely impacting operations, profitability and cash flow. Based upon the review findings, SupplyCo:
  • implemented structural changes to the organization
  • significantly reduced the number of product lines and items
  • cut out low-margin customers
  • revamped the delivery route system
  • changed the methods for allocating inappropriate corporate overhead charges to the division

This division regained profitability and was later sold to a direct competitor.
Links to the other fresh pair of eyes cases:
  1. Operational Inefficiencies Hurt Cash Flow
  2. A Dilemma – What’s Causing the Operating Losses?

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