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Polyethylene Water and Gas Pipe

Issue Faced. Insufficient cash flow due to revenue and margins falling faster than management projected; management underestimated the time and cost required to bring a new product to market. Poor product cost analyses. Little or no operational coordination. Industry. Polyethylene water and gas pipe.

Location. Texas, Arkansas, Arizona, Massachusetts, Mexico

Size Of Company. Sales $75M.

Who Brought In The Team/Individual. Attorney for a Director

Goals Of Assignment.

  • First return to cash flow positive;
  • Return to profitability;
  • Assess profitability by product and customer;
  • Develop realistic timetable and budget for new product launch;
  • Assess long term viability of each plant and company as a whole;
  • Develop remedial action plan for the board’s approval, and
  • Implement.

Actions Taken.

  • Developed detailed six month cash flow model
  • Calculated contribution margin for 90% of products sold and all customers with purchases > $20,000/year which included manufacturing variances and aged receivable carrying costs.
  • Required a standard cost analysis be completed with every order, and refused to book or ship orders below approved margins
  • Required credit sign off before booking new orders.
  • Consolidated admin functions (including shipping) into a single location, reducing redundant operations and staff. Reduced shipping costs by 11% for one plant and 9% from another.
  • Provided weekly reports to the board.
  • Consolidated resin vendors to two, Dow and Equistar, rolling back a 5% cost increase.

Results. Determined that

  • Arizona, Arkansas and Mexican plants were viable and closed Massachusetts and Texas.
  • The new product line was not profitable and ceased production after meeting existing delivery commitments.
  • The company was not viable as an independent entity.
  • Sold the corrugated and pressure businesses to separate buyers for more than book value.

Assignment Duration. 13 months

Resources Utilized. Full time on-site interim COO (ASR), Boston based partner about 25% time, and a staff person as needed.

Testimonial. Available

Submitted By. Alan S. Russell