Equipment Dealer Achieves 600 BP Profit Improvement & Delays Planned CapEx

Large equipment sales and service dealer achieves profitable growth through lean process improvement and space optimisation, delaying significant capital expenditures and bolstering employee engagement and morale.

A U.S. based heavy equipment sales and service dealer was over capacity and out of space at a key facility in a growing market.  Employees in all departments were working hard but running into roadblocks for future growth. 

Challenge

Rapid growth led to space constraints, employee frustration, and the potential need to invest in a new facility.

Employee satisfaction was at an all time low, workload was increasing and frustration was growing. There was a significant amount of internal conflict, groups worked in silos, and it was difficult to get things done. Branch leadership was under significant stress to keep up with limited sources. Things could only get more challenging due to the parent company’s directive to double annual services in five years. The dealer knew it needed more space to grow and the company will willing to invest in an expanded footprint. At the same time, the company wanted and needed smart growth.  Profitability mattered and needed to improve.

Solution

Introduce operational excellence to improve profitability and increase employee satisfaction. Install a new daily management system and lean process discipline to enhance processes, engage employees, and improve productivity. Liberate enough floor space to accommodate near term growth within the existing footprint and potentially delay a planned capital expenditure.

TBM was hired to address three issues:  space constraints, profitability, and employee morale.  After a detailed operational diagnostic, everyone agreed that buying or building more space wasn’t necessarily the best answer. Rather, optimisation of both processes and footprint could free up capacity, drive profit improvement, and improve employee satisfaction.  These improvements would position the dealer to achieve and even exceed its future growth goals without an immediate outlay of cash. 

The go-forward plan included several key priorities:

  • Liberate space within an existing facility and free up capacity.
  • Move the heavy duty truck bays (currently occupying significant space in one facility) to another facility located closer to the interstate and with available room to spare.
  • Conduct a 2P (Production Preparation) kaizen event to determine the best possible layout to accommodate additional service bays for earth-moving equipment and an additional rental service bay.
  • Eliminate high levels of non-billable time and work-in-process and hone in on key quality issues.
  • Introduce a lean based management system with operator standard work, SQDC and Team performance tracking, and teach the organisation how to collaboratively solve problems and to rapidly implement solutions at the point of impact.
  • Enhance operational leadership capabilities and introduce leader standard work,
  • Conduct a change readiness assessment to identify underlying contributors to employee dissatisfaction and make recommendations to course correct and engage and retain associates. 
  • Use a strategic embedded resource to support the transition and to coach and mentor leaders in this management philosophy and empower them to train their teams in lean tactics.

Results

6% profit improvement and delayed capital expenditures for nearly three years.

Collectively, the operational improvements drove a 600 basis point improvement in PAD.  Order on-time in line (OTIL) improved from 79% to 91% and last labour to close (LLC) improved from 13.5 days to eight days or less. Employee engagement and satisfaction increased. 

Download the case study to learn about the three keys to success for profitability improvement, employee engagement, and delays CapEx.

Topics in this Case Study

Managing for Daily ImprovementPerformance Improvement

At a Glance

Client

A full-line large equipment dealer providing sales, parts, service, and rentals for heavy-duty trucking and earth-moving equipment.

Results

Sales & service equipment dealer uses lean to improve profitability by 600 BP and delays $2 million in capital investment for at least three years.

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