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Sustainability: Moving from Common Sense to Common Practice
2016 International Conference
Leesburg, VA - National Conference Center

September 18th - 21st


TOC Rescues Swisher Hygiene (Nasdaq: SWSH)
With Cash From Under Their Own Mattress

Kobus van der Zel - Founder of Global Turnarounds Inc., Certified Turnaround Professional (CTP)
Co-Presenter, Seamus Daley - Vice President of Manufacturing Swisher Hygiene




TOPIC:
How TOC helped an integrated cleaning chemical manufacturer and distributor from being delisted and running out of cash to being successfully sold.


A. Why was there a need for Change?

Late 2014 when Swisher Hygiene’s Nasdaq share price dropped below $2 for the first time ever, they had cash for only three more months of operations. Swisher was originally acquired by industry roll-up veterans Wayne Huizenga and Steve Berrard who did successful roll-ups with Blockbuster Video, Waste Management and AutoNation. The founders’ legendary track record initially allowed them to raise money from Nasdaq investors despite heavy financial losses, but the continued losses and drop in share price not only closed access for more share issues, they were also forced to issue share splits to avoid being delisted.

Step 1 – What to Change?

The Swisher board of directors had challenged the management on the amount of inventory being used to run the business. Global Turnarounds was asked to do an assessment of what the ideal amount of inventory was. Using a detailed 52 week simulation by SKU by location based on TOC demand-pull we showed Swisher’s board that their ideal inventory was 50% lower and that $8.4 million in cash was hidden under their own mattress.

Step 2 – What to Change To?

Even though the standard TOC demand-pull supply chain solution was a good fit for the Swisher Hygiene, the company had been assembled through more than 54 acquisitions of small to medium businesses, with almost no post-acquisition integration except for quarterly financial statements. This meant that each of the 5 manufacturing companies and the distribution locations operated on their own unique ERP system – ranging from home-grown Unix based systems to small more modern systems with no consistent perpetual count or data integrity procedures. Weekly replenishment triggers were generated by dumping inventory and demand data to Excel for formatting into semi-standard replenishment reports for major locations.

Step 3 – How to Change?

To access the cash and reduce inventory on a sustainable basis the knowledge and frustration levels of the Swisher people had to be addressed first. People at all levels were leaving the company – either out of frustration or by being lured away by competitors. A 5-belt continuous improvement credit program was introduced as a pull system for the 1,200 people operating in 5 manufacturing and more than 70 distribution locations cost-to-coast. Libraries with books on TOC, lean manufacturing, general business and personal development were put in all the major Swisher locations. People earned credits for reading these books, and for participating in Kaizen events and other process improvement initiatives. The credits allow them to earn from a yellow through to a master black belt.

The presentation will include video material (if possible) of constraint utilization before and after Kaizen events, examples of Spaghetti diagrams done by teams and detailed charts demonstrating inventory replenishment triggers.

As a safeguard Global Turnarounds’ contract also included the authority to approve all purchase orders, and any buyer could be put under review if buying was not consistent with the video and the detailed training provided to them.

B) How do you measure, refocus, sustain and grow the Change?

By Q2 2015, or 5 months into the project, Swisher reported cash positive financials for the first time since its listing in 2010. The cash positive Q2 result enabled Swisher to be sold to their competitor and industry giant, Ecolab in late 2015.

Yellow and orange belts were awarded at a special ceremony in November to many of the Swisher people who dedicated themselves to their own personal development. The libraries that remain at each major location was comprised not only of TOC books but also include many lean manufacturing books and people were trained on how to perform a Kaizen event or do a Spaghetti diagram to identify improvement opportunities once bottlenecks were correctly identified.

The Key Performance Indicators (KPIs) were changed to TOC metrics, and the accounting personnel were trained and put in charge of administering and reviewing the weekly metrics with the operations and sales teams.

The following obstacles remain:
  • Inventory was reduced by 50% in some locations but IT and management prevented us from reducing inventory at many other locations.
  • Continuous improvement credit system is not linked to performance reviews or incentive system.
  • Many key people have developed themselves far less than others have which raises the question: How much pull and how much push should a company use in developing their people?
  • When markets (and companies) are flush with cash this approach on cash optimization may not get the appropriate attention internally until it is too late (during market down cycles).
Watch a short 5 minute video now



Kobus van der Zel is the founder of Global Turnarounds Inc., operating as a Certified Turnaround Professional (CTP) in companies facing liquidity or transition challenges. Kobus holds mechanical engineering and MBA degrees, and is a qualified TOC Jonah (1999).

Since 1999 he has tied his turnaround fees to monthly profitability or cash flow results, in order to create a pull system for truly understanding the obstacles for higher business and people performance. Coaching and interim CEO engagements over a span of 16 years in South Africa, Canada and the USA has enabled him to summarize the forces preventing higher performance in his book The Forces of Progress (www.lulu.com/spotlight/globalturnarounds).

"When I engage with a new underperforming company I am always surprised at how so many weak people could have gathered in one company” Kobus says. "Eli helped me to understand that people are inherently good, and that it was the company that made the people weak – which is great news, because it means the process can be reversed to make them strong again!”

Kobus’ system for people development is at the root of his turnaround strategies – which combine the best of TOC, lean manufacturing and people development processes to ensure optimal cash flow generation when it is needed most.


Seamus Daley is Vice President of Manufacturing at Swisher Hygiene, an Ecolab company. He holds a bachelor degree in applied science.

He started his career as a programmer/analyst at J.D. Edwards and then project manager at Oracle, before joining his dad’s company Daley International as National Service Manager in 2006.

At Daley International he thrived in the family atmosphere where he essentially grew up in since he was in school, and managed to build close relationships with many customers due to his ability to listen and act on the issues at hand. The family atmosphere also had its limitations which Seamus started to understand from a customer service perspective with its high tolerance for underperformance of people and unstructured supply chain processes. His background in computer science helped him to add structure to the supply chain functioning. He was a key member of the team to create a custom built multi-plant TOC demand-pull software solution at Daley International, including a full perpetual inventory control.

When Daley International was sold to Swisher Hygiene in 2011 his supply chain, manufacturing skills and experienced was recognized with his appointment of VP of Manufacturing for all five manufacturing locations.



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