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Kimball International, Inc. Message Board

  • ddrealist ddrealist Nov 2, 2011 2:15 PM Flag

    The harsh realities of a manufacturing business

    Two major cost factors: labor and materials

    Labor: I had no choice but to attack labor cost

    January of 2010, I was forced to reduce head count by 40%. It was the most difficult choice I had ever had to make. The business landscape changed so dramatically. I even had to slash top level pay by up to 20%. (I slashed my pay much more in order to keep as much labor force as possible)

    My speech went something of the following to both the labor force and administration: "Guys, look, you're not going to like this but everyone is going to view this as working more for less." Some left on their own; some got fired because they could not accept the new economic reality upon us.

    Materials: In short summary, the vendor/supplier list changed dramatically due to being forced to find the best prices possible in order to compete in the "New Economic World"

    2009: Record losses (a mistake of mine of trying to hold on)
    2010: Modest profit, recovered 1/3 of 2009's losses
    2011 ytd: It wasn't record years like 2007 or 2008, but it's about a close 3rd or 4th. We brought more employees aboard (at lesser pay), but we're more able to effectively compete in the current marketplace.

    Now to KBALB:

    KBALB's worldwide headcount in chronological order according to past 10-K's:

    2007: 7,560
    2008: 7,195 (4.8%)
    2009: 6,164 (14%)
    2010: 6,187 +0.3%
    2011: 6,362 +2.8%

    KBALB's gross profit percentages:

    2007: 20.3%
    2008: 18.4%
    2009: 16.8%
    2010: 15.8%
    2011: 16.2%

    KBALB is obviously sacrificing margins in order to win business. Heck, my company's product prices are nowhere near 2007 and 2008 levels, but I managed to bring costs down to reflect new product pricing conditions in order to turn a profit.

    Adjust to the new economic reality because the pie has shrunken along with the size of slices of the amount of business that's out there.

    Yes, it is possible to adjust, UNLESS of two reasons I could think of:

    1) The possibility of having the day dreams I had in 2009 by "holding on" (refer to my remarks above), or simply by not reacting fast enough on the necessary cuts

    2) Or, the company is in effect unable to compete in the marketplace.

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KBALB
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