Transforming Losses into Gains: A Portfolio Company Success Story

When we got the call from one of our longtime private equity clients, it was clear they needed help fast.

One of their portfolio companies was facing major material losses in production threatening both profitability and a successful exit.  The stakes were high, and they needed a solution quickly. At TBM, we’re known for delivering rapid, measurable results—and this project was no exception.

When a Portco’s Profitability is on the Line

It started when one of their portfolio companies was experiencing significant material losses in production. They were having issues controlling their costs and the team was struggling to gain traction on turning this around. Unchecked, the situation threatened to torpedo the portco’s overall profitability—and that could prevent an advantageous exit.

The PE firm knew that TBM had multi-industry manufacturing expertise, specialized technical knowledge, and a deep CI (Continuous Improvement) capabilities toolset. In other words, exactly the right resource combination to halt the hemorrhage, transform operations, and let the manufacturer get back to creating value quickly. Our moto is also “We don’t do it to you, we don’t do it for you, we do it with you,” which in this case working with the team got them on a path to success.

Process Improvement Through the PE Lens – The Need for Speed

Of course, speed was key. For the portco and the PE firm. Our lean process improvement approach always leverages speed to help manufacturers maximize opportunity and competitive advantage. Private equity clients also appreciate this bias for action and our hands on approach. The private equity world has always been highly competitive, but never more so than now. For the past several years, deals have been fewer and farther between. Operational uncertainties have also multiplied. The hard stop of an investment exit date makes it imperative to grow and capture portco value in the shortest possible timeframe. This is where TBM excels. Rapid results are the hallmark of all our transformational work.

When executing a process improvement game plan for a PE portfolio company, we are always mindful of the ultimate goal—to boost performance and capture maximum value as quickly as possible. For this project, that mandate translated into a two-month timeframe. Two months to:

• Diagnose the root cause of the material usage discrepancies
• Implement a solution to remove this huge roadblock to profitability and value creation
• Deliver the training and tools for internal teams to sustain the gains.

Adding a Force Multiplier for Game-Changing Results

The losses began showing up in January. Out of 3 plants in this division, there was one which was underperforming more than the others—in other words, spending more than budgeted on material. A lot more. The portco Board noticed the material variance right away, as did the PE firm.  For a few months, internal experts tried various tactics to bring the usage back in line. Still, the debits kept mounting. While the internal team had deep, company-specific process expertise, it lacked the bandwidth, and “big picture” perspective to translate improvements into bottom-line results. TBM Lean manufacturing specialists have done exactly that for hundreds of firms. In a matter of weeks.

With TBM’s broad roster of industry-specific manufacturing veterans, our PE team had no trouble finding the right person for the job. I was a good fit for several reasons. I have 36 years of experience working with firms in positions from the shop floor to the C-suite with specific experience in the plastics industry. As a seasoned operations changemaker, I’ve also guided many teams over operational speedbumps like this one and on to dramatic, sustainable bottom-line results.

Define, Quantify, Improve, and Sustain: A Roadmap for Recovery and Value Creation

The first step was to identify the specific cause of the material variance. Was it due to the quality of the input material, employee skill level, equipment efficiency, the production process itself, or even environmental factors? Any or all of these could be part of the problem. And in a facility with multiple production lines, where exactly did the losses originate?

Our team began by conducting a rapid, in-depth diagnostic assessment of current operations. We gathered data on the extrusion lines and the forming lines to quantify the impact of the factor that could be contributing to the material variance. We aligned with the operations team to focus on three specific extruder lines with the highest opportunity. Then, we turned the operational improvement engines on high.

I led the turnaround team that included the plant manager, the maintenance manager, line supervisors, production manager and a rotating group of support team leaders in scheduling and materials, logistics, and engineering. Together, we crunched the numbers, and leveraged Lean manufacturing approaches, methods, and strategies to create and implement the process improvement gameplan. Within two weeks, material variance started to decline.

Empowering Sustainable Transformation

This case study exemplifies our commitment to not just solving immediate problems, but equipping teams for long-term success. Our approach mirrors my time as a scuba instructor preparing students for independent diving. Just as I would teach my diving students the 24 basic skills needed to explore the ocean safely on their own, we imparted crucial continuous improvement skills to the portfolio company’s team.

Our goal wasn’t merely to fix the material usage variance issue, but to empower the organization to tackle future challenges independently. We dove deep into the operational waters together, identifying root causes and implementing solutions. More importantly, we ensured the team could navigate these waters long after our departure.

The feedback from the Project Manager and PE Operating Partner confirmed our success in this regard. We didn’t just patch a leak; we transformed the company into a self-sustaining CI organization. This approach is crucial in the ever-evolving private equity landscape, where the ability to swiftly identify and rectify operational inefficiencies can make or break returns.

For PE firms seeking to maximize value in a competitive market, partnering with operational experts who can deliver this kind of transformative, sustainable change isn’t just beneficial—it’s essential. It’s about equipping portfolio companies with the skills to continually improve and adapt, ensuring they’re well-prepared for whatever challenges the market may bring.

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