PE Case Study Two

PE Holding Oil/Gas Products Business

We worked with a large private equity group in the US on one of their recent major holdings. Due to an uptick in gas and oil demand they had some inefficiencies and capacity issues in their manufacturing operations and could not meet the increase in demand and were losing customers to their competitors.

After a brief assessment we found the following:

  • Their equipment was out of date and had no Preventative Maintenance completed on it.
  • Due to the poor shape of the equipment they were running many jobs on alternate pieces of equipment causing cost inefficiencies.
  • They hadn’t effectively looked at the market to competitively benchmark their internal costs in years, if ever.
  • They hadn’t looked at new technologies that other in their business had invested in years ago to manage their costs in that marketplace.

Our solution was to:

  • Look at the most constrained parts and develop an out sourcing plan to eliminate the supply issues.
  • Look at the competitive landscape of suppliers that could take on this additional work to meet the uptick or continue to supply until client can figure out how to solve their internal inefficiency issues.
  • Bid over 200 parts that would allow client the flexibility of running what they need to internally while outsourcing what they felt they had to. We utilized a FTP site to do the competitive bidding and managed the entire process for them.
  • We reviewed various newer technologies for the client that provided not only a cost saving but an improvement in quality.

End result was we found capacity for the client. We provided them with a $15million savings in labor absorption as well as a piece part savings.  We caused them to look at their inefficiencies such as mismanagement of the operation (which caused standard and actual cost inefficiencies) as well as review their own technology roadmaps for making cost effective components in the future. We got them to understand Preventative Maintenance of their equipment was key to priding a competitive product and a sustainable future for their employees. There is much more work to do but providing this savings is a good head start to dramatically increasing valuation for the PE investor.