Service Lines > Strategy and Operations Improvement > Client Success-Dressing for Success
A manufacturer of basic T-Shirts wanted to assess the threat of foreign competition…
This $250MM manufacturer of basic T-Shirts had operations in California and Mexico. Though profitable, the Company’s weak systems and processes had led to high levels of excess inventory. Transportation and warehousing costs were excessive, and there were concerns regarding the causes of recent margin deterioration. Additionally, management and owners were unclear as to the threat of foreign competition for basic t-shirt products. Keystone was initially engaged to perform due diligence, specifically looking at risks of foreign imports, management strength, and opportunities for operational improvement.
We determined that due to the type T-Shirts the Company was producing, the risk of losing market share to foreign imports was minimal. However, critical operational processes broke down with regularity, and we had great concerns about the strength of the management team and the financial reporting system.
Because of weaknesses in warehousing, transportation, and inventory management, we estimated that there were over $5MM in savings that would be generated if these processes were improved. Keystone was engaged post acquisition to help realize the opportunities.
Keystone worked with management to completely redefine the sales and operations planning process. We developed and implemented processes that had "the right inventory at the right place, at the right time". Additionally, we defined requirements and assisted in the implementation of information technology tools to support the revised process.
Inventory turns increased by 25% and sales and EBITDA increased by 20%, in part due to the right inventory being in the right place at the right time. In addition, warehousing efficiencies increased by 40%, and warehouse capacity was increased by 25%.
With a proven increase in EBITDA, the equity sponsor sold the Company six months after the acquisition at an ROI of over 1,500%