- Longview Fibre Paper & Packaging
- Pacific Gas & Electric
- Cascade Networks Inc.
- Kraft Foods
- Roland Wines
Case Study: Longview Fibre Paper & Packaging
Industry: Paper & Packaging
- Company: Longview Fibre Paper & Packaging
- Situation: Following the sale of the company to a private equity firm, the company was split into a timber management company and a $700 million paper and packaging manufacturer. This revealed that the paper and packaging company had been losing money for several years and had to be corrected for the new company to stay in business. The private equity firm set a minimum target of $70 million in annual EBITDA.
- Role: President & COO
- Analysis: A profitability evaluation of current markets, products and related equipment was initiated concurrent with a review of the mill and box plants leadership teams.
- Findings: The traditional financial reporting of the company made profitability evaluations of market, products and equipment very difficult. The reporting was redesigned to provide clearer visibility. This showed that there were a number of markets, products and paper machines that were consuming rather than generating cash. A plan was developed to reconfigure the mill to support only the cash generating products. The review of the mill and box plants leadership showed that the group was primarily oriented to steady consistent execution of past practices and were risk averse and heavily dependent of direction from top management. The sales team was primarily focused on account management and care-taking rather than generating new business.
- Solution and Result: As planned, the mill was reconfigured to concentrate on cash-positive products. This allowed for the reduction of over 600 salaried and hourly employees. The company and mill leadership teams were restructured to reflect the streamlined operation. The sales teams in the box plants were also restructured to include more aggressive business development talent. The company exceeded the $70 million EBITDA target after the first year and has continued to increase returns since then.
Case Study: Pacific Gas & Electric
Industry: Nuclear Power Generation:
- Company: Pacific Gas & Electric’s Diablo Canyon Nuclear Station
- Situation: The Nuclear Station was one year from entering a new open-market environment where it would have to compete on price as opposed to the historical Cost-Plus environment that had been in place since the Plant’s inception. The senior executive of the Power Generation Division estimated that the annual operating costs would have to be reduced by 40% to be competitive and sustainable. The Leadership Team had been built to assure consistent safe operation in the Cost-Plus market.
- Role: Lead Consultant
- Analysis: There were three aspects of the initial analysis: a plant life-cycle analysis, a function and staffing analysis and a Leadership Team assessment.
- Findings: The plant life-cycle showed that the plant was solidly in the Operate and Maintain portion of its useful life. However, it was still being managed as if it were in the Design phase with constant costly upgrades and additions being made. This led to a functional analysis which showed the necessary functions for the Operate and Maintain phase and the excess functions and staffing of Design Engineering, Purchasing and the use of contractors. The Leadership Team analysis, using a series of Behavior and Value assessments, showed the primary orientation of the team was to maintain the Cost-Plus status quo and continue to “gold-plate” the plant with ongoing upgrades.
- Solution and Result: Following the Plant life-cycle analysis, the client executive prioritized Operations as the primary decision-making department, using safety and reliability as the guiding principles. The Engineering department was down-sized significantly to focus on Operations and Maintenance support. Most contractor usage was eliminated except as supplementary to the onsite Maintenance department. All remaining contracts were competitively bid using highest total value as the selection criteria. Finally, the leadership team was restructured to reflect the streamlined organization and to achieve a balance of Safety and Operations expertise along with more business and cost-oriented leaders in the support areas. $200 million of annual operating costs was reduced from a budget of $500 million.
Case Study: Cascade Networks Inc.
Industry: Broadband Services and Equipment
- Company: Cascade Networks, Inc.
- Situation: The company had grown to include four divisions: Internet Services, broadband equipment sales, public safety vehicle up-fitting and network design and integration services. The source of profitability was assumed to be the ISP and equipment sales there was a persistent shortage of available cash which limited the ability of the equipment sales division to keep stock on the shelves for quick order fulfillment.
- Role: COO
- Analysis: The company’s financial reporting was limited to a simple version of QuickBooks and made profit visibility by division or service difficult. A profitability analysis was initiated to clarify results by division and product or service within each division.
- Findings: The profitability analysis showed that the Internet Services division, while profitable, consumed more cash in capital improvements than it generated. The equipment sales and network integration divisions were also profitable but those profits were being used to pay for the capital needs of the Internet Services division. Finally, the public safety up-fitting division was shown to be clearly unprofitable. This mix of results was leading to an overall break-even result for the whole company thus making any additional investment in inventory, etc. difficult.
- Solution and Result: A buyer was sought and found for the Internet Services division. This yielded a reasonable return on the network investment. The public safety up-fitting division was phased out after helping the customer agencies transition to other suppliers. The remaining equipment and network integration divisions continued growing profitably with cash available to support more shelf stock. The additional cash also enabled the purchase of large project equipment in advance so that the division could compete for higher return opportunities.
Case Study: Chrysler
Industry: Automotive Production
- Company: Chrysler
- Situation: Chrysler was launching a new mid-size car line at the Sterling Heights, MI plant. Demand from dealers was high and the plant was having trouble keeping up with production requirements due to seemingly random quality problems that led to delays and uneven production.
- Role: Lead Consultant
- Analysis: An analysis of the quality problems was conducted to determine any patterns as well as the root sources of the problems. The consulting team spent several days working with the union workers in the assembly line.
- Findings: The analysis showed that although the quality problems seemed random, there was in fact a Pareto relationship with ~ 30% of the reported types of issues accounting for more than 80% of the total issues and production delays. Also, the analysis showed several categories of root causes – worker training, line speed too quick, minor design issues (which could be solved quickly in the current model year), and major design issues (which would be solved by the next model year).
- Solution and Result: A two-pronged strategy was employed using the Poka-Yoke (Error-Proofing) methodology:
- The high percentage issues were assigned to a cross-functional team of assembly workers, maintenance, Chrysler plant and design engineering, and supplier engineering to triage and resolve.
- A team of union assembly workers and consultants was established to identify potential quality issues starting at the end of the assembly line and working back upstream to the beginning. They worked with the line employees and plant maintenance to solve the short-term issues uncovered and forwarded the longer-term problems on to the cross-functional team to address. Overall quality issues fell from over 400 per day to less that 200 within the first few months. The errors continued to reduce as the longer term issues were resolved.
Case Study: Kraft Foods
Industry: Food Production
- Company: Kraft Foods
- Situation: The Kraft Foods Cheese Plant in Corning, NY was experiencing high demand and needed to increase throughput while maintaining traditionally high quality standards.
- Role: Lead Consultant
- Analysis: Each of the three product lines was analyzed for process flow, staffing, maintenance practices, and bottlenecks.
- Findings: The analysis of each line yielded different throughput improvement opportunities. The Mozzarella and Ricotta lines had ongoing maintenance scheduling conflicts and planned outage overruns, as well as process control quality issues. The String Cheese line had bottlenecks on the packaging line, which impacted the upstream cheese production process and caused uneven production vs. schedule. The solution that had been tried was to pull additional staff from other departments. This led to more bottlenecks and quality problems due to varying training and experience levels of the supplemental staff available.
- Solution and Result: A collaborative maintenance scheduling process was developed and installed with input from all production lines. Outage planning and scheduling software was brought in to improve the outage planning and execution tracking. In the String Cheese line, a line-balancing process was developed and installed using “Takt” time (based on market demand) so that the packaging area staffing could be adjusted in advance of increases or decreases in demand. Overall plant production increased by over 20% with fewer quality issues and unplanned outages.
Case Study: Champion
Industry: Paper Production
- Company: Champion Paper
- Situation: The Champion pulp mill in Hinton, AB produced specialty high-brightness sheet pulp for use in producing high-quality printing paper. The pulp machines at the end of the production process, which produced sheet pulp for shipping to customers, were experiencing unpredictable reliability leading to uneven production vs. plan. Additionally, planned maintenance outages in the different parts of the mill were running over schedule, causing upstream and downstream impacts to production.
- Role: Lead Consultant
- Analysis: A review of the historical performance of the pulp machines was conducted, along with a review of the maintenance outages in all mill areas over the previous year.
- Findings: The review of the pulp machines showed a series of unplanned breakdowns that caused the rest of the mill to curtail production. It was also determined that the training level of the crews in the pulp machine area was very inconsistent, including the supervision. The area manager was new to the position and was overwhelmed with reacting to the unplanned breakdowns. The maintenance outage review showed that each area of the mill planned and scheduled their outages in a vacuum with little coordination with the other areas. When the upstream areas were forced to curtail, they would cherry pick some of the outage maintenance jobs, thereby disrupting the coming planned outages.
- Solution and Result: The first focus was to stabilize the performance of the pulp machines. This was accomplished by prioritizing the repeat breakdown issues for root cause resolution by mill maintenance and engineering resources. Additional operator and supervisory training was conducted, utilizing the senior management members of the mill who had come up through the ranks. Scheduled outages were limited to Predictive and preventive maintenance only. A cross-mill team was formed to plan and coordinate scheduled outages in each area. A “ready list” of maintenance work was created for each area to use during any future curtailments. The result was significantly more consistent performance from the pulp machines, including an entire month with no unplanned outages, which had never happened before. Overall mill production increased by over 10% and the number of unplanned breakdowns in all areas dropped due to better coordination and execution of their planned maintenance outages.
Case Study: Roland Wines
- Company: Roland Wines
- Situation: A start-up winery added a tasting room and restaurant along with increasing wine production for both retail and wholesale markets.
- Role: Lead consultant
- Analysis: A profitability analysis was conducted to determine the actual cash contribution of each part of the business.
- Findings: The financial system include a basic version of QuickBooks and the Square Point-of-Sale system with no integration between the two. The founder was only able to see the total bottom-line results each month but had no visibility into what was causing fluctuations or losses.
- Solution and Result: The detailed profitability analysis divided the business into several categories (wine sales, food sales, event rentals, merchandise and other) to determine the relative gross profit of each. The analysis showed that the sales of premium wines was the largest gross profit contributor. While sales of lower shelf wines, food and rentals were profitable, they couldn’t provide enough cash to cover the indirect expenses of the company. The analysis changed the founder’s grape buying plan to increase production of premium wines and make sure they never ran low. The analysis also showed the opportunity to lower food prices and increase traffic, resulting in the sale of more premium wine. The Square POS data was synchronized with QuickBooks to provide consistent visibility to sales in each category.