Case Studies

#3 Company Reference
Martorell, Spain, 2000-2001
Motorbikes supplies assembly
200 Staff members
Abstract
Situation
In December 1999, the company was a model company in the subcontracting of sectors such as automotive (Honda, Yamaha) and consumer electronics (HP). The commercial activity was not considered necessary because, since its foundation in March 1991, it had enjoyed a good reputation in its industry. From a small artisan workshop with two employees (current managers), its growth had been based on customer satisfaction. In the area of assembly subcontracting, this company was the reference in the sector.
Even so, the company entered into a severe insolvency situation. The cost analysis clarified that both sales prices and revenue volume were correct and sufficient to end the year with a profit. Even so, employees entered the third consecutive month without being paid. Suppliers were in the same situation. The imminent danger was not a drop in employee performance, but that the suppliers would stop supplying parts and, therefore, the contract with the main customer (Honda) could not be fulfilled. The decision was tough: with the money available, should the banks be paid (2 months without meeting financial obligations), the employees or the suppliers? Furthermore, Honda complained about the delay in the delivery of some series of orders. They were told that more employees had been hired than the contract had called for. Honda replied that this was impossible, insinuating that the performance of the employees had dropped because they had not been paid for months. Several discussions ensued with no apparent end in sight. It was decided that a Honda employee would go to the company's plant for some time to time, observe and collaborate in everything necessary to detect and solve the problem. Days went by, and nothing abnormal was noticed—quite the contrary. On the contrary, with the implementation of new production and organizational techniques, employee performance improved dramatically. How was it possible: with productivity per employee above the standards set by Honda-Japan, with prices under control in all areas, how was it possible?

Strategic Approach
Faced with this situation and having appreciated the financial position of the company, a final step was taken: To dispense with the planning delivered by Honda and to make one of its own that, as an objective, would respect the assembled units that Honda needed each month. Within a few weeks, the information derived from the new system made it possible to detect the root of the problem. Honda accepted the conclusions, so everything was solved. However, at the end of April, the difficulties continued because, in reality, the weekly production plans were also altered according to the final demand Honda had at any given time.

Key Results - After 12 months

  • § 60% productivity improvement; 10% above the Japanese matrix company.
  • § The financial problems were solved, reaching a positive cash flow surplus equivalent to 10% of sales.