PE Case Study One

HVAC Residential Service Provider

We worked with a PE group out of the northeast who acquired this business over a year ago.  Goal was to enhance margin for the PE group in preparation for short term sale. Our initial assessment showed that there were two huge cost issues facing this business that prevented it from achieving their growth goals.

1.)    Their call centers were inefficient.  They were allowing too many chances to up sell their services to escape them through the call center. They were closing about 12% of their calls and they needed to close 50% of their calls. They operated call centers in various locations and there was an opportunity to consolidate them in one location even though they were in different markets. Solution: Was to consolidate call center into one location without losing its regional independence. Training was provided on the importance of developing a personal relationship with the customer as well as the ability to up sell service requirements and long term warranty contracts. Measurement systems and incentives were put into place to reward the proper behaviors within the call center. In three short months the call center was closing over 50% of its calls and had achieved a $4 million annualized efficiency improvement.

 

2.)    There was tremendous inefficiency in how they acquired their materials.  There was no negotiation done that combined the usage from the various markets, no inventory management or control of their service fleet. They operated out of dimly lit and poorly managed inventory locations and one could argue why they even had inventory in the first place. Solution: Negotiate long term contracts with HVAC suppliers that provided inventory management so we could shift the inventory back to the manufacturer as well as a volume rebate plan which would provide incentives for the various locations to execute the buy. Look at all of the second their supply base and negotiate a JIT supply program to supply and stock various fleet trucks on daily inventory basis, eliminating the need for the client to carry inventory.  We agreed upon a stock inventory list and each driver would read the bar code as he used the component and it would report a usage back to the supplier for replenishment on the truck the next morning. This allowed the client to eliminate all of the warehousing space and turn the space into service or office areas. We analyzed their service vehicle fleet and with the help of one of the largest fleet providers in the US worked out a plan to replace vehicles on a timely basis and reduce their maintenance costs by over 30%.  A total net result was $1.8 million savings in material and maintenance as well as elimination of 16000 square feet of warehousing space.

Net result was an improvement in operational efficiency of $5.8million in a business of $40million in sales and a huge gain for the PE group once complete.