Overview of Project
A privately held $85 million wholesale seafood distributor was having cash flow problems and engaged Manchester to provide Chief Financial Officer services to assess the situation. Our professional discovered that the board of directors was misinformed about the company’s real problems, and advised the board of directors on various solutions to rectify its operational and management issues. As a result, the company improved its production and cash flow issues and divested of one of its divisions to invest in a business segment providing a greater rate of return.

The Challenge
Our client manages operations in two primary divisions, with one division operating in three different regions with each region distributing to restaurants and grocery stores. At the time of our engagement, the company was experiencing cash flow issues out of industry norms, and the board of directors believed vendor payables were being stretched too far to maintain satisfactory vendor relationships.

The Engagement
One of Manchester’s professionals was engaged to provide Chief Financial Officer services as a colleague to the company’s CFO, with weekly reporting duties directly to the chairman of the board. The scope of engagement included reviewing operations, budgets, and use of cash; participating in board meetings and operations and vendor calls; communicating with the managers of each regional operation; comparing operations and efficiency ratios with industry standards; and determining the primary issues affecting cash flow.

The Solution
We discovered that vendor management and vendor contact was actually above average, contrary to what the board of directors believed. Rather, the issues creating cash flow problems were excessive inventory, unnecessarily long lead times in production, inefficient factory operations in the specialty foods division, and management issues in one of the regional distribution offices. Our assessment revealed that this division manager, who also served on the board of directors, was deflecting a proper understanding of the issues.

Under our direction, the client changed managers in two locations, made changes to operate the specialty foods factory more efficiently, and sold one of its regional operations.

The Impact
Armed with a solid understanding of the economics of its business, our client was able to attract a premium price in the sale of one of its divisions. In addition, it is proceeding with the knowledge of its cash uses and how to make appropriate capital contributions. For example, it used the funds from the division sale to invest in a business segment with a higher rate of return and in a faster growing industry segment. It has strengthened its management team, improved production throughput, and decreased production lead times. In summary, our client has stronger operations and a better understanding of its financials in order to make solid business decisions.