Creating value from operations. Crispin Mair Head of Operations Restructuring Crimson & Co

Transcription

1 Creating value from operations Crispin Mair Head of Operations Restructuring Crimson & Co

2 Key insights How to create value in a portfolio business Typical timescales Senior management necessary capabilities and skill sets Top tips for engaging with operations restructuring agents 2

3 Operational scope Capacity management Asset utilisation Organisational design KPI design Cost to serve Forecasting Inventory management NPD/NPI Supply chain strategy Supply chain planning Sourcing decisions Manufacturing decisions Stock decisions Network decisions Range and price decisions Suppliers Factories Warehouses Distribution Channels Consumer Sourcing strategy Supplier management Spend analysis Cost reduction E-procurement Production run strategy Outsource/toll manufacturing Operational effectiveness and reliability Layout and material flow Stock control Network design Service level certification Operational effectiveness In-house vs outsourcing Field force management Transport management Routing & scheduling Capacity management Home delivery Product availability Last five yards Obsolescence Service level management Internet and home shopping Service level expectations by sector Returns 3

4 Selected clients 4

5 Gamestec case study Gamestec rents fruit machines, pool tables & juke boxes to pubs and clubs It buys them Installs them Replaces them Services them Collects cash from them Disposes of them 5

6 Background May 2007 Maintaining market share, but market size decreasing sharply Part of Danoptra, which also owns Leisure Connection and Bell Fruit Debt of 90m to three banks August 2008 Restructured with bank partnership led by Credit Suisse 6

7 Creating a leaner operating platform months later Consumables kits Drop box solution New fleet Dynamic scheduling PDAs Headcount reduction Call handling Procurement 19 stocked depots 7 sales regions 1,306 staff 4 stocked depots 4 sales regions 1,040 staff 7

8 Impact Headcount 20% less in the field 24% less in the depots 17% less central support 20% overall reduction Productivity Four times more through the depot each day 22% more pieces installed per person Financial Considerable FY08 operating cost improvement Even larger ongoing operating cost improvement 15% ongoing operating cost reduction 8

9 Cash flow m Breakeven brought forward 7 months Actual/ forecast Months Budget Peak cash requirement significantly reduced 9

10 Acquisition of Leisure Link, July 08 In 2007, the number one in the market, Leisure Link (part of Inspired Gaming Group), tried to buy Gamestec. Twelve months later, Gamestec bought the majority of Leisure Link. 10

11 Lessons learned Went well Exceeded financial targets Employee involvement Structural changes broke the mould no old habits to return to Last man standing Rules of thumb Expect the unexpected (eg. market downturn, IT infrastructure) Make tough organisation decisions quickly and unequivocally New ways of working come right from the top Middle management and supervisors are key 11

12 Operations restructuring What are you hoping to achieve? Shareholder value ( of course!) What are the biggest challenges? Costs too high R C S (examples) C Revenue too low Service poor Restructuring priorities B C R S Business model R B S B 12

13 Operations improvement menu To reduce costs Sourcing contracts NPI controls Inventory reduction Priority based budgeting Lead-time reduction Efficiency improvements Supplier rationalisation Range rationalisation Shared service centres Network rationalisation Factory closures Structural SC redesign 12 months months 2-5 years 13

14 Operations improvement menu True product costing/pricing Supplier management Sell obsolete stock KPI alignment Voice of the customer Planning systems To improve service and revenue Planning optimisation Process reliability Continuous improvement Process reengineering Sales & marketing strategy Customer integration 12 months months 2-5 years 14

15 Operations improvement menu To change the business model Non-core outsourcing Changeover reduction Top team review Mgt performance incentives Lease arrangements Third party business Acquisition /disposal 12 months months 2-5 years 15

16 The right senior management team? Capabilities & mindsets Consistency of strategy and clarity of plans but maturity to recognise mistakes and react Top team aligned and working well together Strong finance team and good real time performance reporting, which may necessitate a systems upgrade/systems spend Respect both received from, and given to, employees with fair treatment Operational leaders have to get their hands dirty and understand issues to take out costs and grow revenue Robust challenge In turbulent times, these characteristics are especially important 16

17 Top tips Advisors Deep, relevant experience Meet the team in advance and get referrals Ensure the team includes the people with the relevant experience Upfront assessment by way of a trial Make sure there are enough of them Limit the number of advisor groups or contractors Continuity No-nonsense, non political approach Involve senior management in selection process 17

18 Top tips Approach Finite period of time to get a difficult phase out of the way Don t let uncertainty linger and any redundancies drag out Long term change programme it really does take time! Style Ensure trust is built between senior management and advisors Ensure challenge is welcomed and constructive Fees Risk sharing Fair contingent fees Equity deals 18

19 Create value through operations Last man standing Change the ways of working so that new business models can be created Turn negative EBIT into positive, or simply increase EBIT Release cash fast Financial restructuring has been the focus for many years. Now is the time to focus on operations 19