Business Case Study Objective Perspective Drives Profitability

Business Case Study: Objective Perspective Drives 150-year-Old Textile Mill Towards Profitability

1.     Executive Summary: This business case examines how new, objective perspectives from outside the textile industry and strategic actions led this 150-year-old textile mill in Minnesota towards profitability for the first time in over a decade.  New ideas and perspectives from outside the textile world brought fresh thinking and a new sense of “we can do this!” to a deflated operations team of product design and production control & operations.  Tenacity in sticking to the plan, monitoring weekly results and communicating thoroughly the small successes yielded profitability improvements enabling the company to overcome significant challenges, including years of losses, management changes, and a tight labor market. With internal improvements augmented by adopting a hybrid production model (vs 100% all in-house production) and optimizing supply chain logistics, the company achieved increased production, reduced costs, and improved flexibility in lot sized driving reduced lead-times, facilitating broadening product lines, reduced costs, and expanded revenues and profits.  The cumulative results of the actions below over the course of 4 years drove operational losses from over $1.6M to a profit of $250K and a forecast of 2X profit in the coming 12 months.

2. Situation Analysis:

• The company experienced 12 years of losses amounting to over $25 million cumulatively.  This is immediately after coming from a two-year shut down where equipment was crated and ready to ship to Pakistan.

• Lack of structured, knowledgeable management oversight and frequent CEO changes added to operational challenges coupled with centuries-old equipment having sat idle for two years. In the following 12 years the equipment was not fully maintained nor utilized and knowledgeable maintenance personnel for such equipment were not available in the Midwest.

• The tight labor market with global manufacturers and their state of the art facilities within 10 miles and unattractive work environment (100+ year-old factory with 80+ year old equipment) further compounded difficulties, along with limited funding for capital expenditures.

3. Objectives:

• Long Run Fabrics –

  • Improve profitability through cost reduction, cross-training, production scheduling improvements (family of parts) and production efficiency.

  • Focus on military runs for Navy and West Point

  • Top 10 fabrics for consumer lines

• Labor - Address labor market challenges and improve the work environment through labor scheduling

• Supply Chain - Optimize supply chain logistics and sourcing strategies with supply chain partners on the east coast seeing a decline in their customer base (shirting industry) providing leverage for our woolens.

• Short Run Capability Implementation - Overcome obstacles related to supplier identification, logistics, and color approval process timing for new yarns for future fabric designs to implement capability for short runs of custom fabric designs

  • Use Caldonian for under 100# lots, quick turn on new yarn approvals

  • Dedicated loom for under 250 yard runs on custom designs

4. Challenges:

• Tight labor market for production personnel and lengthy training cycles for candidates.

• Unattractive work environment compared to alternatives.

• Lack of funding for capital expenditures.

• Challenges in identifying capable suppliers, managing logistics, and ensuring timely color approval for yarn dying.

5. Actions Taken:

• Transitioned from 100% internal production to a hybrid model including outsourcing, logistic optimization with east coast scouring, carding & spinning of white with optional dying.  Optional weaving at two locations in PA and RI if desired.  All options at lower costs.

  • Identified and qualified suppliers for key processes such as yarn making, yarn dying, and weaving.

• Expanded finishing operations to a second shift to improve control of fabric size and softness of quality texture.  All finishing of fabrics done in-house!

• Implemented MySYS production control operations platform for production planning of in-house and out-sourced production planning and monitoring of all production jobs and costing of production.  Strategically planned and managed east to west long-haul trucking to maximize loads of fabrics, yarns, and wool from east coast subcontractors to Minnesota operations.

• Implemented a workforce transition program with HR leadership with local NGO and city and state resources for lower skilled entry level positions.  This providing much need labor and a opportunity to screen new employees for advancement to higher level and higher skilled positions.

• Implemented a daily, weekly, and monthly operations communication cadence with full transparency of operations metrics, feedback on internal and external customer satisfaction, and financial improvements.

6. Obstacles Overcome:

• Successfully identified and qualified capable suppliers and negotiated favorable pricing.

• Managed logistics efficiently despite trucking cost increases.

• Implemented a new operating platform for production scheduling and costing providing better visibility into costs and shopfloor WIP.

• Streamlined color approval processes for yarn dying & color matching for quicker response on custom fabrics.

• Management “stubbornness” outlasted and overcame the doubters and made believers of skeptics.

• Overcame 15-week lead-times on custom 5-color fabrics and in some cases stopped telling customers “No.”

7. Results Achieved:

• Increased linear yards of fabric production by 15%.

• Reduced total costs on fabrics by 15% by leveraging higher volume weaving operations and yarn production on the east coast.

• Reduced total costs on high volume yarns by 8% leveraging scouring, carding, and spinning on the east coast.

• Gained flexibility for low-volume yarn dying and color variations through outsourced dying processes via quick turn with Caldonian.

• Implemented a custom fabric product line (lakes and maps) via the 250-yard custom designed 5-color fabrics resulting in 15% revenue increase but a 25% increase in total gross margin.

• Reduced employee turnover in entry level wool dying & scouring processes by 50%

9. Conclusion: Through strategic actions and a shift towards objective, fresh, and new perspectives in decision-making, the company overcame significant challenges and achieved notable improvements in profitability and operational efficiency. These improvements contributed to the business being more flexible and entering new custom fabric segments yielding new revenue growth at greater profit levels. This case study underscores the importance of adaptability, strategic planning, and continuous improvement in driving business success and profitability in competitive markets. 

This short concise summary does not do justice to the tremendous amount of communication, teamwork, collaboration that took place over these years.  Continually articulating the vision and more importantly the role of each person in that vision, the role they needed to play, and the importance of their role was critical, and the consistency of this communication was incredibly important.  These years were among the most satisfying in my career and the relationships with the operations leaders and product engineers continues to this day a decade post my employment, and five years post my ownership share was liquidated at a 2X profit.