Operational analysis revises sales forecast by 20%

Client Overview

The client had been a low volume, high tech manufacturing division of a large corporation. They were in the process of evolving into a higher volume manufacturing facility. The parent corporation was selling this division to divest non-core businesses. The client was in the process of replacing an unstable, homegrown MRP with a very sophisticated ERP. Existing reporting was rudimentary with limited visibility into operations.

Our Involvement

We were brought in to conduct an operational evaluation of the company for a prospective buyer. We identified several key development issues, all of which were determined to be of reasonable risk. In an effort to evaluate their sales forecast we developed a database tool to analyze an available production report derived from their existing MRP system. By comparing the MRP production schedule with the client’s sales forecast, we determined that the planned manufacturing output fell significantly short of forecast sales. Long component lead times made it impossible to achieve their sales forecast schedule.

The Result

The client adjusted their forecast to match the production output our analysis predicted. The prospective buyer was able to reduce their offer by 20% to reflect the resulting reduction in forecasted revenue and EBITDA.

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