Furniture Expertise Yields Fast Profits
Overview:
A $165MM Furniture Manufacturer encountered severe challenges due to the decline in consumer liquidity from home equity borrowing and aggressive off-shore competition. Overall labor expense was increasing and, as a result of these factors, EBITDA reversed from positive to negative for this historically profitable company.
By engaging Lean Techniques and other KGI proprietary methods, the company was able to increase profits by $7.2MM and achieve other remarkable results within 6 months.
The Solution:
Even though low wages and access to inexpensive raw materials were driving the furniture manufacturing industry from its traditional strongholds in North Carolina and Southern California to Asia, some domestic and Mexican manufacturers are finding that by changing their methods they can succeed.
The application of Lean Manufacturing techniques provides quick cost and other improvements when implemented properly. We have found that these projects generate a significant return-on-investment and can be implemented within 3-6 months.
While these adopted methods were developed in the automobile industry, their seamless application to the furniture business drives lower inventory and labor costs.
Designed New Production Flow. The KGI solution was to reconfigure their traditional, task-centered manufacturing process into a system that is based level production and one-piece-flow. We organized manufacturing into work cells that contained all the process functions: wood working, cutting, sewing, foam, assembly, upholstery, and finishing. Next, we removed the distance between steps and then we removed the product handling and storage functions between steps. In short, the key was to focus and organize around the value-adding steps that result in a finished piece of furniture. By doing these things, our client had achieved the following within 6 months:
- Increased Profits by $7.2MM annually
- Downsized 1,000 employees for a 50% decrease in Total Labor $
- Consolidated 5 manufacturing facilities into 2
- Reduced Total Inventory $ by 35%
- Increased first-pass quality from 40% to 90%
Whether a Company is struggling financially or on the cusp of breakthrough growth, KGI can help. Our seasoned experts work alongside management to solve complex cash flow issues, operational challenges and other business crises. If liquidity or sale is needed, KGI provides a powerful combination of services and expertise to achieve outcomes that cannot be duplicated by other standalone consulting firms.