Challenge
This leading global supplier of performance elastomer solutions was experiencing a downturn due to escalating raw material prices for rubber-based polymers. Sales volumes were down, costs were up and manufacturing utilization had declined. Based on extensive data mining from their SAP ERP system, Synergetics reviewed each SKU to understand material costs tied to gross margin. The Synergetics team also examined pricing, contract terms, manufacturing costs, and customer demographics. Working as a collaborative team, Synergetics helped execute the following:
- Reviewed product manufacturing capacities
- Renegotiated material vendor costs for best pricing and customer contracts to correct excessive discounting
- Shut down unprofitable product lines
- Began the realignment process necessary to rightsize the business and regain profitability
Solution
While the Company did experience a 30% decrease of revenue and customers through this exercise (but far less than expected), all lost business had been at a negative margin. This elimination of unprofitable business lines and rightsizing the manufacturing operations led to $8M in additional EBITDA being gained.
By taking advantage of the information which resulted from a strong business analysis, this company realized record profitability over the following two years.
This increase in overall performance helped lead to its sale, which in turn, effectively doubled the business worldwide.
