Late September 2022, a Midwest-based industrial equipment and parts supplier held by an ultra-high net worth investor and long-time client of a multi-family office contacted Marabek to review their post-pandemic M&A strategy. The company was acquired in the late 2000’s by the investor for a cash price when annual revenues were under $50mm with 5 warehouse locations. Over the past 20 years, management had grown its product catalog from 5,000 SKUs to 40,000 SKUs and distribution locations from 5 to 18 including 4 locations in Canada.
Conservatively, the Company had spent $80mm since the Pandemic through small acquisitions in select regions for their farm and construction equipment business.
Challenges with integrating and synergizing post-acquisition.
Marabek began with our simple business and financial analytics. Customer segmentation by profile, segmentation and transaction history based on product mix gave deeper insights to the Company’s inventory stocking programs.
By mid-2023, the annual turnover with 18 US and 4 Canadian-based sales and warehouse locations, the Company approached $192mm with average gross margins over 12%. The Company needed to redefine its operations to harmonize costs across its facilities.
Harmonize operations to sustain margins.
The CFO and CMO were anticipating growing pains while customers struggled to get parts and components on time. The SIOP process failed to maintain consistent schedules and costs for logistics crept into gross margins. Unplanned shipments and expedited deliveries exacerbated an already stressed system.
Over the course of 4 months, Marabek and its team modeled several scenarios to mimic the demand forecasts and coordinated with suppliers to plan a Kanban program as well as a VMI system to ensure nothing would be delayed due to long-lead times. Several hundred SKUs were consolidated in the same process. A high priority alert system was implemented to ensure sales and warehouse triggered notices through the ERP system. By partnering with the logistics providers, the Company was able to reduce expedite fees and last-minute surcharges. Additionally, the Company presented a more consistent inventory control that translated to better cash flow and liquidity.
Marabek with the Company established a quarterly audit process to ensure systems and processes were sustained. Customers saw a double-digit improvement in timely delivery and satisfaction. The owner and the CEO, along with the executive suite were surprised to achieve a higher return on assets as well as improved balance sheet and net margins in less than 6 months since Marabek was engaged.
