The series: We look at decision makers among Canada’s mid-sized companies who took successful action in a competitive global digital economy. Here, we profile Saskatoon-based Superior Cabinets, which undertook a major turnaround based on technologies to slash inefficiencies. This is what happened.
Superior Cabinets survived the 2009 recession, but the Saskatoon-based company felt it needed a dramatic overhaul if it was to succeed going forward.
The manufacturer and installer of custom kitchens was working flat out, but was falling behind on orders and barely making a profit despite a strong flow of orders.
“In our best revenue period we did maybe $45-million in sales, we needed 400 people to do it, it took 16 weeks to make a kitchen, and we barely made money,” says Scott Hodson, the company’s president and chief executive officer.
Then the company undertook a turnaround. And this is what happened.
“We equalled that revenue a couple of years ago, we had a guaranteed lead time of six weeks, 230 people, and we made a lot more money.”
The biggest change at the privately owned company was shifting from a manufacturing-centric operation – “the plant ruled the day, we happened to have customers” – to a business based upon customers and providing a far better, and faster, customer experience.
Mr. Hodson and his team found that Superior Cabinets was burdened by layers and layers of processes, procedures and back-office costs that customers never saw and “were not prepared to pay for.”
It began its overhaul with a customer-focused pledge of delivering a custom kitchen in five weeks, six weeks for special orders. It was an ambitious goal, considering its 16-week average delivery time.
Superior Cabinets brought in a technology company and spent more than $1-million to map every process of its sales process, starting with its first customer contact to kitchen design and installation.
Superior Cabinets’s built-in inefficiencies were most apparent in its web of 17 operating systems, which were, for the most part, “homemade” and “common in a family company.” It reduced those software systems down to just two and dramatically reduced its administrative staff, cutting its employee base nearly in half.
The new streamlined software-based approach allows the company’s sales staff to design a customized kitchen with a customer and send the order straight to its manufacturing plant. “No one touches an order,” explains Mr. Hodson.
Cutting out the back office from the sales process also had another benefit for the company as it added retail outlets and sales staff in its home markets of Saskatchewan and Alberta: growth would not cost more. “When we grew, we didn’t have to add any cost,” says the CEO.
Despite its myriad software systems, it had another technology black hole to address: Management had poor financial insight into the day-to-day health of the company. “There were no management systems. It takes us four days now to do a month-end P&L [profit-and-loss calculation]; before, it was over 30 [days]. You didn’t know your business and every time you thought you had it figured out, you didn’t.”
Adding software that provided near real-time information on the company’s financial health provided aid in another aspect its transformation, namely sharing key performance data with employees. If the company achieves its profit targets, it pays bonuses to all its employees “from the lines right to the executives.”
Having fixed the sales and financial management software deficiencies, the company has since introduced systems for scheduling and logistics, from its factory to its network of stores and dealers.
Within the factory, which the chief executive describes as “obsessed with innovation, obsessed with continuous improvement,” the company has instituted a “Kaizen” program, from a Japanese management concept of continuous improvement, that encourages plant workers to suggest and implement changes that save time or money or both. “Last year we did about 1,000 Kaizens in the plant; that’s all employees.”
The factory today “is producing far more than it ever produced with less people and better quality.” Although it employs fewer factory workers, productivity is up about 50 per cent, the CEO estimates. Waste is down from 7 per cent of sales to just 2 per cent today and better inventory and ordering systems have allowed for just-in-time delivery with no inventory on hand for critical parts such as cabinet doors.
That new productivity has made Mr. Hodson hungry. “We want more business. In the past we were close to capacity.”
Philip Vincelli, co-founder of Montreal-based efficiency consultants PVA Consulting Group, says Superior Cabinet’s past difficulties in being able to scale quickly enough to meet demand “is a great problem to have. That is the best type of situation that we like to find ourselves in with clients.”
A far worse scenario for PVA is when companies “are losing business because they can’t compete.” Pulling costs out of a business can often mean painful layoffs, such as the ones Superior did with its administrative-staff reductions.
Mr. Vincelli has found that companies are often “busy pumping products out” and often do not see inefficiencies that have accumulated over time. “What about the things that get in the way? What are the problems that you encounter, why don’t we resolve those and put a mechanism in place so that they become evident?”
Having survived the recession, a slimmed down, more technologically savvy Superior Cabinets is now facing its latest challenge, namely the energy-led slowdown in its home markets. It is now expanding its sales footprint by creating a network of sales representatives in new markets.