Case Study - Plastics Extruder

Case Study # MDE05

CLIENT:    
$55,000,000 Plastics Extruder – Midwest

SITUATION:   

Key metrics of performance were not accurately identified and managed which led to excessive levels of overtime, inventory, Accounts Payable and Receivable, no cash liquidity, and a line of credit that had reached its maximum limit. The accounting function was in turmoil with the implementation of a new accounting package and the financial statements were meaningless as product cost was inaccurate.

ACTIONS TAKEN:
A “cradle to crave” approach was taken to define the proper production and inventory flow and establish key performance metrics. A cash management system was implemented to address the cash flow and banking issues which included a cash flow forecast, Accounts Receivable collection procedures, and a new vendor payment policy. Paradigm Management took the lead in managing the software implementation plan which brought the process back on schedule. The costing system was realigned based on the true production activity, production of pounds of product not labor hours, which provided realistic monthly results and product cost. A process of product cost reviews was implemented to include a cross functional team.

RESULTS:    
As a result of the team effort between the company employees and Paradigm Management cost reduction in excess of $1,900,000 per year were implemented and additional cash flow of $2,500,000 was generated as a result of reductions in inventory and Accounts Receivable. With the redefined processes and monitoring tools overtime was significantly reduced.