How to (really) reorganise a company: case history no. 5
Theory and practice
In many industrial companies, volume grows… but margins don’t. Why? Because the numbers are not read at the right time and, when they do arrive, they are often of no use for making decisions. The typical signs:
- Inventory growing faster than liquidity.
- Hourly cost estimated, not updated.
- No separation between fixed and variable costs.
- Selling prices disconnected from actual production costs.
- Static budget, set in January and ignored in the months that follow.
- No map of margins by product, customer or line.
- No simulation of the effect of volumes on margins. Case History #5 Sector: precision engineering Turnover: €9.8M Net profit: 0.7% No cost analysis No weekly data on productivity or plant utilisation No reliable metrics on production cost Management had the perception of “working hard to earn little”, but lacked concrete tools to understand where inefficiencies were arising and which job orders were really absorbing margin.
Action required:
- Calculation of the real hourly cost, updated every 90 days, including absenteeism, machine downtime, overtime and maintenance.
- Reclassification of the profit and loss account on a management basis, showing direct, indirect and structural costs.
- Economic simulations, analysing three scenarios - base, stress and growth - to estimate the impact of changes in turnover and inflation.
- Weekly dashboard, with indicators on productivity, cycle times, absorption of fixed costs and unit margins by line.
- Review of price lists, based on real margins by product code.
- Continuously updated forecasts of cash flow, expected profit and resource utilisation.