Perspective-Another set of eyes sees different opportunities Rob Bohn President Nema Enclosures Mfg, Inc.

Nema Enclosures Mfg

What we do Manufacture Custom and Standard Electrical Enclosures Key Markets –Hydrocarbon processing –Water/waste water –Transportation Build from customers’ specifications, competitors’ part or mutual product development Our elevator pitch is we make environmentally rated metal boxes

What makes us different… UL listed and have up to IP66 Certification Specialize in small production runs We can private label and silk screen customer logo on enclosure Custom colors, sizes and brackets Quick deliveries on specials Virtually no finished goods inventory

Background Purchased the business in 2000 and sales were $700,000 Grew the business to over $7,000,000 in 8 years Very little emphasis on profit growth (ran as a lifestyle business) Education is in engineering but prior career success came from sales and sales management Business plans consisted of revenue growth with no real way to manage for profitability

The Phone Call July of 2008 business received a phone call from a consulting company New Office assistant put the call thru (one I never would have taken) Message struck a nerve as we just had our largest incoming month in history (over $1 Million in new orders) Knew things needed to change in the business but needed help in figuring out what was best course No real management team was in place and no one to help cope with growth

Core Issues As business grew, we added services which increased level of complexity of work flow Organizational structure did not match what the company had grown into or what the customer really needed Compatibility issues between software programs lead to inventory being out of control Everyone was responsible, which really meant no one was Bonuses were paid based on revenue growth not profit growth

Original Organizational Chart President Product Line Manager Mechanical Designers Drafter Inside Sales Production Manager Brake/Shear/Notch Machine Operators Welding/Grinding Welders/Grinders Assembly Power Coat Assemblers Quality Control Office Manager Purchasing Clerk

Accountability Issues Product Line Manager (PLM) did all the quotes and passed orders down to mechanical designers Design conflicts and customer changes funneled thru PLM PLM felt like he was not responsible since he passed the PO to the mechanical designer Mechanical designers measured by how many job packets created in a day Lots of miscommunication and errors Inspections done at the end of manufacturing, not in-process

Process Flow First Pass

Process Flow Second Pass

Process Flow Third Pass

President/Owner General Manager of Production Open Vice President Operations Senior Project Manager I Nema Enclosures October 2008 Office Manager Junior Project Manager Weld/Grind Team Brake/Shear Team Powder Coat Team Assembly Team Shipping/Receiving Junior Project Manager Admin. Assistant Quality Control Materials Manager Senior Project Manager I Senior Project Manager II Open Junior Project Manager Open Director Marketing Maintenance Inventory Clerk

Changes Made Product Line Manager moved out of office and position eliminated PLM and 2 Mechanical Designers promoted to Senior Project Managers Inside Sales promoted to Materials Manager Full time shipping/receiving person plus inventory clerk Job Descriptions written for every function in the company PM’s have order responsibility from quoting, in-process inspection, drawing/job packet accuracy to final inspection and order close out

Changes Made Daily production meetings with the PM’s in attendance to insure “their” orders are on track Weekly team meetings to review sales, bookings and most importantly…….PROFITABILITY One day per week production meetings include a budget review and any variance from budget Weekly checks on labor times and cost Bonuses paid to shop supervisors on productivity and staying below budget on expenses. PM’s paid commissions based on profitability of “their” orders

Changes Made Detailed review of second shift determined they cost more than they were producing. Key people were moved to the day shift and the balance were eliminated Implemented 8 new cost savings measures based on the team’s feedback Prices are quoted based on real costs not market prices Budgeting process has allowed us to successfully manage thru the downturn

Results Company profitability up 3 fold over same time last year Shop productivity up 35% Stayed consistently below budget on all expenses for the first 3 months of the year Bookings down 35% and shipments down 15% but still more profitable than last year Significant improvement in cash flow Managed Budget allows us to invest in marketing and advertising to diversify sectors served

Results Owner no longer takes expediting calls Procedures written for nearly everything we do. The test is I have to be able to follow the procedure (the logic being “If I can do it, anyone can”) PM’s “fight” to be the person that handles the latest inquiry or quote from new customers True sense of team work (no more finger pointing) Easier to work on additional projects examples: one PM helps with website development, another handles all UL inspections, the third handles waterjet technical issues

Lessons Learned Profitability has to be the single most important focus of the business Owners must work on the business not in the business Consider a personal business coach, an outside board or other entity to hold yourself accountable Outsiders’ view can be extremely helpful. The consultant charged nearly $90k for the project and the payback was less than 180 days

Questions?