Case Study
174% jump in stock price
31% reduction in debt
290 basis points improvement in gross profit margin
The iconic appliance manufacturer Hamilton Beach was ready to optimize its supply chain operations. The Glen Allen, Va.- based company, known for its blenders and other kitchen essentials, was facing challenges in a few different areas and needed a new approach to blend efficiency and innovation. These challenges included the following:
Rapidly rising product and transportation costs pushed Hamilton Beach to raise the prices of its products — a decision executives did not take lightly. In some cases, this resulted in lost shelf space at retail. Although the company added 6.7% to total revenue as a result of the increases, it saw reductions in unit volume.
Although products were selling well at retail overall, overstock levels in other areas affected reorders, leading to increasing inventory values and associated debt. In addition, upstream interruptions and increases in transportation time delayed production orders, causing the company delivery slowdowns during the peak selling season and leading to seasonal inventory delays further down the timeline. These situations resulted in a 33% inventory increase and higher storage costs.
The company had been working to make improvements by implementing a new enterprise resource planning (ERP) system (ERP) and a different advanced warehousing system. In addition, there was an upgraded facility with new technology and workflows. However, the ERP improvements and process changes meant the company needed better data to perform a root-cause analysis and determine how to address its challenges and drive process improvements.
Hamilton Beach needed to address high costs, inventory mix and process improvements, but finding the capital to do so was a struggle. The manufacturer had reached reached much-higher-than-desired levels of debt, which raised interest expenses by 60%. Company decision-makers had lots of questions about how to proceed next.
As a longtime ASCM-corporate member, Hamilton Beach supply chain leaders turned to ASCM with several pressing questions: They knew they had challenges, but where should they begin? How did they compare to others in their markets? With limited resources, where should they set their priorities? With an elevated sense of urgency, could they get started quickly? As a mid-sized organization with finite funds, what would this cost?
Exclusively available to ASCM corporate members, the answer to these questions would lie within the Supply Chain Operations Reference (SCOR) and SCORmark. The SCOR model is the only comprehensive, universally accepted and open-access supply chain standard. It gives organizations the ability to assess and improve their company’s supply chain, leading directly to improved business performance. Meanwhile, SCORmark provides a metrics-based assessment and benchmarking to identify key gap areas.
An ASCM-led supply chain excellence workshop taught Hamilton Beach’s executive committee and key cross-functional leaders, including the CEO, how to apply key theories from the handbook. Having all of these people in the room provided a stronger baseline of supply chain knowledge and gave employees the supply chain vocabulary to discuss improvement projects and metrics in a way that was meaningful to all stakeholders.
The next step was to identify key gap areas and a starting point for true transformation using SCORmark, an assessment tool developed by ASCM in partnership with PwC. Hamilton Beach decision-makers picked finance and IT professionals to co-lead the initiative alongside mentors from ASCM and its partner PwC because these team members had the best access to the needed data and could provide an unbiased analysis. The manufacturer was benchmarked against 24 supply chains in similar industries, selling into similar markets, and with similar average selling prices and stocking strategies, which proved to be very insightful and relevant. The overall process was straightforward, and the manufacturer had set its fact-based priorities for the future within just two weeks.
The manufacturers’ goals were to improve cost efficiency; support overall business growth; become highly responsive; improve risk and disruption resilience; and drive customer service, experience, fulfillment and engagement. The numerous initiatives to support these goals included product, transportation and trade-related cost management, source diversification, improving relationships with governing bodies, backorder shipment management, and improving inefficient customers and processes.
With a roadmap and guiding key performance indicators in place, Hamilton Beach was ready for action. While much of the transformation effort felt natural and smooth, there was one detail that supply chain professionals felt needed improvement: organizational alignment.
This initiative, driven by finance and IT professionals, focused on improving information, product, and cash flow using the SCOR model. Hamilton Beach reallocated two experienced supply chain team members to lead plan-to-product and customer order-to-cash processes, without changing headcount.
With a strategy pivot and new-and-improved priorities, knowledge and organizational model, Hamilton Beach managed to meet and exceed many of its goals within one year after its supply chain excellence workshop.
Inventory optimizedImprovements in inventory mix and increases in turns generated enough cash for the manufacturer to pay down significant amounts of debt. Inventory was also reduced enough to exit an overflow warehouse and consolidate into a single hub warehouse. This enabled the professionals to focus on warehouse modernization and offer to sublease the overflow warehouse.
Finances stabilizedHamilton Beach generated $88.6 million from its operating activities, the highest level in its history. The company used the cash to reduce debt by 31%, return capital to shareholders and internally fund the acquisition of medical appliance company Health Beacon in cash. In addition, the business’s stock price jumped from a low of $9.21 to $25.24 in less than a year.
Prices reducedHamilton Beach also returned its success to its customers by realigning and optimizing market prices, which helped the manufacturer increase market share in what was previously a declining market and outperform the small kitchen appliance industry. Its gross profit margin expanded by 290 basis points, and operating profit increased by 22%.
Hamilton Beach views these successes as just one stop on its journey. Now that it has foundational data, executives plan to conduct the SCOR process again to measure improvement efforts and determine future opportunities. There are also more long-term projects from the SCORmark benchmarking on its docket for the coming years. This ongoing commitment to optimization ensures that Hamilton Beach continues to refine its operations and serve up even greater future success.
