Estudios de caso

Resolving an Inventory Imbalance

J.S. Held adquiere GLI Advisors para fortalecer sus servicios de apoyo a proyectos de construcción en el oeste de EE. UU. y Hawái

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La situación

Design and manufacturer of electronic scoreboards, programmable display systems, and large screen video displays for sporting, commercial, and transportation applications.

  • The COVID-19 pandemic caused slowdowns and stockouts of electronic components and other materials needed to manufacture finished products.
  • Delays in completing projects were further impacted by a difficult labor environment and COVID-related employee absences.
  • The disruption of production caused WIP Inventory to increase and deliveries/invoicing to be deferred.
  • Delivery dates were not achieved; to appease customers, AR collections were deferred, increasing DSO
  • Part shortages began to ease. However, the Company decided to increase the "safety stock" of inventories to mitigate any future product shortages.
  • To fund increased inventory levels, AP was stretched, and the credit facility was increased and fully drawn, reducing liquidity to critical levels.

Nuestro asesoramiento

Our experts engaged by the Company as Financial Advisor.

  • As deliveries improved, our team worked with customers to bring AR balances back to contract terms.
  • Established protocols for a stricter approval process for sales managers to approve project quotes outside of pricing guidelines.
  • Reviewed inventory by major SKU categories and standing purchase orders, identifying $20M of parts in a significant over-stocked position or “orphaned," and started to wind down over-stocked inventory.
  • Initiated weekly calls with purchasing to better control inventory levels and to reduce Inventory “safety margin” orders.
  • Developed a process to better track parts and equipment delivery timing to assembly facilities.
  • Identified a significant increase in Net Contract Liabilities (deposits received prior to work performed) that would require $26M of additional capital to reduce to historical averages.
  • The company improved its Cash Conversion Cycle (DSO + DIO – DPO) by 20%-30% and was on target to reduce working capital by $35M.
  • A validated plan to improve working capital and liquidity enabled the Company to refinance the Bank Facility and avoid a sale-leaseback of a key manufacturing site, which management sought to avoid.
  • Subsequently, due to the improving balance sheet, the Company was able to issue a $25M cost-effective 2nd lien convertible note to partially fund the reduction of Net Contract Liabilities and provide liquidity to support the business's growth.

Contacto clave:

Dan F. Dooley, CTP 
Director ejecutivo sénior
Práctica de Asesoría Estratégica
+1 603 660 8952 
[email protected] 

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