ProcessModel was used in a company to reduce operating expenses by $133 million per year, over three years by directly attacking the value stream.
Founded in Michigan in 1912, this company helps individuals and the organizations that employ them around the world to work more effectively. This company has led the office furniture industry in sales every year since 1974. Its product portfolio includes seating, lighting, storage, furniture systems, interior architectural products, technology products and related products and services. Worldwide net sales, including unconsolidated joint ventures, were in excess of $7.4 billion. Dedicated to providing the finest office furniture and systems available in the market, This company takes its job seriously. Their motto is to “transform the ways people work, to help them work more effectively than they ever thought they could.”
This company, its subsidiaries, and joint ventures have dealers in more than 800 locations, more than 49 manufacturing plants in 35 locations, 80+ sales offices, dealers in more than 800 locations, 540+ product lines, 22,000+ employees around the world, and 88 years of tradition.
Despite rises in revenues, overall earnings actually decreased 16.8 percent, as compared to the previous year. Several factors contributed to this decrease in profitability. The major reason for this dive was lower sales among the company’s larger customers. Other elements identified by were:
- Competitive pricing pressures that occur when a market grows slowly
- Expenses involved in completing acquisition of another line of office furniture
- A one-time $15 million after-tax charge to cover retrofits at several of their customers’ facilities
- New product introduction and ramp-up costs
To overcome this setback, The company outlined key goals (four corporate strategies and six growth strategies).
The four corporate strategies were:
- Be a work effective company
- Achieve operational perfection
- Pursue ambitious financial goals
- Live core values
The six growth strategies involved:
- Focusing on product innovation
- Pursuing new acquisitions, alliances, and new ventures
- Leveraging the company’s global presence
- Leveraging the company’s dealer network
- Leveraging the company’s installed based
- Increasing international revenues (by fulfillment of the above objectives)
They identified several initiatives to help them reach their goals. One of those initiatives is Value Stream. This initiative has a primary goal of eliminating redundancy and reducing SG&A expenses by $133 million per year, over three years. In addition, the team has developed an ongoing continuous process improvement with a long term focus on eliminating redundancy and reducing costs. This process fully implemented will allow evaluation of projects so see if they contribute to Value Stream goals. Thy needed to have a tool that aided in their analysis efforts. That’s when they turned to ProcessModel.
Our goal was to create a Value Stream “as-is” map, make it the standard for the company and then benchmark proposed process, service and technology changes against the “as-is” to validate and understand the impact before we committed to the project. Working against the five-phase “ProcessModel Project Process,” The company and ProcessModel began model design and development. They have finished phase 2 of the model and is moving into phase 3.
The ProcessModel Project Process involves:
- Development of project goals
- Establish a project plan, data collection, and “as is” model creation
- Validate “as is” model and understand results
- Analyze “as is” model
- Develop alternatives.