Case Study

Driving Profitability: How BDO's 80/20 Approach Enhanced Operational Efficiency for a Packaging Manufacturer

SUMMARY/OVERVIEW

Enhancing Commercial Operations for a Private Equity Exit

Explore how BDO helped a U.S.-based manufacturer of custom paper and packaging enhance its commercial operations without relying on significant capital investment. With the goal of preparing for a private equity exit within three years, the company was focused on accelerated growth strategies to boost its profitability quickly.

Key Takeaways

Reduced working capital by $14 million and enhanced gross margins by 5 percentage points through focused operational strategies.

Improved EBITDA of $17 million on a lower revenue base, positioning the client for continued growth.

Gained a 7-percentage point improvement in the number of quote wins through enhanced transparency and accuracy in pricing strategies. 

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The Challenge

Driving Growth With Limited Capital Investment

A custom paper and packaging manufacturer with $240 million in annual revenue was preparing for a private equity exit within the next three years. To reach that goal, the company aimed to drive growth and profitability while limiting its need for capital investment.

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The Approach

Driving Organizational Transformation Through Strategic Initiatives

Achieving rapid results without major capital investment required more than a business strategy — it required a cultural change within the company. By engaging with our 80/20 team, the client was prepared to fully embrace organizational transformation to achieve its goals.

Outlining a three-year strategy in collaboration with the client’s C-suite, our team identified critical areas of improvement that would yield impactful results, including financial reporting, data analytics, and employee training.

  1. To help institute a change in culture and operations, our team organized training sessions that focused on an 80/20 data-driven approach designed to create rapid growth in key business areas. 

  2. This included advising the client on various operational enhancement and simplification strategies across the business.

  3. Additionally, we helped the client improve its data analytics to gain better insights in addition to launching monthly business reviews.

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The Results

Finding Growth and Operational Efficiency

  • Enhanced Operations

    With a new strategic approach, the client began to quickly experience improved results and new benefits. This included an enhancement to its business development process through refined customer profiles and a better identification of market segments that had above-average growth potential. Because of the new operation procedures we helped the client implement, this led to greater agility and response time in capturing prospective opportunities. In addition to their heightened ability to attract new business, the client also saw a greater wallet share with their existing key accounts.

  • Meeting Customer Needs

    The client also experienced a 7-percentage point improvement in the number of quotes it won due to greater transparency and accuracy in its pricing strategies. This was coupled with an increase in profitability by lowering the cost to serve smaller customers. Using company-specific and lower-volume products, the client was able to meet the needs of its customers with an increased reach while lessening its expenses to do so.

  • Improved Manufacturing Processes

    To enhance operational efficiency, we assisted the client with improvements to its manufacturing processes across nine plants, which involved aligning raw materials and production capability for each site. This reduced working capital by $14 million and enhanced gross margins by 5 percentage points through focused operational strategies.

  • Cost Reduction

    Those operational strategies extended to the entirety of the business, with our team helping the client find cost reduction and vendor consolidation opportunities. These actions led to a reduction in material costs and better overall financial health for the organization. Further, we aided the client in streamlining their billing and accounts receivable by developing comprehensive policies and procedures, improving cash flow, reducing past-due risks, and enhancing the overall customer experience.

    All of these actions resulted in an improved EBITDA of $17 million on a lower revenue base, positioning the client for continued growth.

By working with the client to develop and execute Commercial and Operational Value Creation initiatives aligned with their strategic plan, we have been able to drive improved EBITDA of $17 million on a lower revenue base while positioning them for growth through a greatly improved sales funnel.
Michele Arnison
Director, BDO

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