Client & Industry
Design, manufacture and service of specialist technology of industrial cleaning machines. Bespoke, low volume production of machines sold mainly to the automotive industry.
Size of Plant in case study
At time of this particular case study the company had; 95 employees in total on site, turnover 20m Euro p.a., achieved from production 15m Euro and 5m Euro in sales from services provide to clients.
Challenge: Project number 3
The business context from a financial perspective was as follows: A number of operational challenges and problems were leading to financial constraints in the form of lower than expected profit margins for the business. Continual constraints with cash-flow, was leading to very limited investment in new machines and development of people. Anxiety and frustration growing particularly with the top management team which included the: CEO, Finance, Production and Sales Directors.
Project challenge was to identify the key problems and root-causes which were affecting the business, and over time eliminate them using tools, processes, principles and competences from the Lean Leadership Program for Continuous Improvement derived from the Toyota Way and TPS.
Size of Problem
Sales: 60% of sales value were generated from two customers all purchasing one cleaning machine model. The company sales catalogue offered some 16 different cleaning model versions. All these sales were generated by the Sales Director with very little engagement from the remaining sales team.
80% of all orders were delivered with some form of delay, some with a delivery delay of over three weeks to the client. Average time to complete one large bespoke cleaning machine at the time was 14 weeks.
Profit margins per machine were not measured sufficiently so as to allow a reasonable cost comparison between the budgeted cost and the actual realisation costs. Overtime costs were reaching 9% of monthly salary costs. Quality of products produced by the business was considered good. Clients appreciated the innovative solutions to their requirements. Clients did however, complain of high costs of purchasing the machines and unacceptable delivery times.
Internal conflict between the Directors of the production, sales and accounting teams was identified as the key problem in the business, which needed to be addressed as soon as possible.
Consequences of the Problem
CEO under pressure from banks to provide more financial security to cover the next tranche of loans the business was needing to maintain the cash-flow and allow for some limited form of investment in equipment.
The company had difficulties in attracting new employees who had sufficient work experience, particularly in production management, warehouse management and mechanical design.
A constant conflict of facts, analysis and opinions between accounting, sales and production was producing a very stressful atmosphere in the business. Each side blaming the other for one thing or another. In short, we could say there was no Top-Team driving the business, just three semi-independent Directors each going their own way, where ever that was meant to be!
In PART 2 of this case study, I will go through the 6 key Habits which allowed this business, over a two year period, to become the most foremost designer and producer of cleaning machines in Europe, reaching sales of over 90 m Euro.
Build you organisation by allowing your people to focus on structured problem solving.
What Toyota focuses on is “Developing People through Problem Solving”, with a great deal of support mechanisms around the word “support”.
In the case of this business, the support came from the 16 Habits.
I hope this case study has shown how this system works and why it works.
If you would like to know more, please contact me, Mark Forkun on: mark.forkun@llw-institite.com