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#88 – Project Gold Multifamily Solution – Business Model

#88 – Project Gold Multifamily Solution – Business Model. March 20, 2012. Agenda. Welcome & Kick-off D. Bennett Multi-Family Segment Presentation Ravi Siddappa Activity Teams D. Bennett Workshop I & II – Update D. Bennett / D . Mills Cost Clarity D. Bennett / C . Winans

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#88 – Project Gold Multifamily Solution – Business Model

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  1. #88 – Project GoldMultifamily Solution – Business Model March 20, 2012

  2. Agenda • Welcome & Kick-off D. Bennett • Multi-Family Segment Presentation Ravi Siddappa • Activity Teams D. Bennett • Workshop I & II – Update D. Bennett / D. Mills • Cost Clarity D. Bennett / C. Winans • Logistics R. Siddappa / Tom Bolden • Workshop II – Ideation R. Siddappa • Impact & Next Steps D. Bennett

  3. Agenda • Welcome & Kick-off D. Bennett • Multi-Family Segment Presentation Ravi Siddappa • Activity Teams D. Bennett • Workshop I & II – Update D. Bennett / D. Mills • Cost Clarity D. Bennett / C. Winans • Logistics R. Siddappa / Tom Bolden • Workshop II – Ideation R. Siddappa • Impact & Next Steps D. Bennett

  4. Market Definition Senior Housing / Assisted Living Hospitality – New & Rehab Military Housing New Construction: High Volume Apartments

  5. Areas of Focus West Mid-West Northeast 4 Minneapolis 1.7 18 5 5 7.7 Milwaukee 6.3 Chico Lakewood Detroit Cleveland Chicago 4 5.7 Reno 3.5 7 Columbus 1 1.3 Sacramento 6.4 Indianapolis Denver 13 5.6 Las Vegas 4.8 1.8 Chino 1.7 11 Phoenix Raleigh Los Lunas 6.2 Charlotte Tucson Myrtle Beach 2 Dallas Atlanta 33.6 *Thousands 5.7 Houston 10 Direct / Sales Tampa Orlando Branches/Sales / MCS Stuart Southeast Ft Myers Countertop Plants / Sales

  6. Total Served Annual Market - 2011 Projections 110K Starts 1.2M Cabinets $185M 6.4M Tops / SF $160M $345M Opportunity $154/CABINET ASP $25/SF ASP

  7. Total Annual Market - 2012 Projections 448K Starts 4.4MCabinets $439M 21.0MTops / SF $526M $965M Market $99/CABINET ASP $25/SF ASP

  8. Total Annual Market - 2012 Projections 448K Starts 4.4MCabinets $439M 21.0MTops / SF $526M $965M Market $99/CABINET ASP $25/SF ASP

  9. Agenda • Welcome & Kick-off D. Bennett • Multi-Family Segment Presentation Ravi Siddappa • Activity Teams D. Bennett • Workshop I & II – Update D. Bennett / D. Mills • Cost Clarity D. Bennett / C. Winans • Logistics R. Siddappa / Tom Bolden • Workshop II – Ideation R. Siddappa • Impact & Next Steps D. Bennett

  10. Activity Teams • Team 1 • Leader: Tom Linn • Focused on NPD launch activities related to for Project Gold. • Engineering, product oriented activities, etc. • Team 2 • Leader: Doug Bennett • Focused on Business Model activities necessary to obtain targeted ASP. • Potential logistics scenarios, commercial policies, allocations, etc.

  11. Team 1: Update

  12. Business Model Update – Team 2 • Team 2 • Leader: Doug Bennett • Focused on Business Model activities necessary to obtain targeted ASP. • Potential logistics scenarios, commercial policies, allocations, etc. • Team Members:

  13. Agenda • Welcome & Kick-off D. Bennett • Multi-Family Segment Presentation Ravi Siddappa • Activity Teams D. Bennett • Workshop I & II – Update D. Bennett / D. Mills • Cost Clarity D. Bennett / C. Winans • Logistics R. Siddappa / Tom Bolden • Workshop II – Ideation R. Siddappa • Impact & Next Steps D. Bennett

  14. Business Model Update – Workshop I: Alignment • Workshop was held on Feb 15th and Feb 16th • Objective at the beginning of the workshop • Windows of wisdom was built with the team - Mark Ayer’s clarified questions and concerns • Rope of scope activity was conducted – Mark Ayer’s clarified project scope • Project Gold Diggers was initiated

  15. Project Gold Diggers: Initial Focus Area’s

  16. Project Gold Diggers: Focus Area’s • Four focus area’s were identified Multifamily Features/ Rules Logistics Process Simplification Cost Clarity

  17. Objective of Focus teams • Generate information and questions • Work was performed between Feb 17th to March 5th • Each work stream was headed by content expert team Multifamily Features/ Rules Logistics JEFF PARK TOM BOLDEN Process Simplification Cost Clarity CHRIS WINANS DAVE SAYLOR

  18. Stimulus for Workshop II • Workshop stimulus was gathered between March 7th and 12th • Team: Tara Iott, Kevin Crosby, Anthony Morabito, Ravi Siddappa, Kasey Harris, and MORE • Related world examples • Revolution concept • Re-expression concept

  19. Workshop II - Ideas • Workshop was held on March 13th and March14th • Refined Objective of the workshop • Chris Winans and Tom Bolden presented their team findings

  20. Agenda • Welcome & Kick-off D. Bennett • Multi-Family Segment Presentation Ravi Siddappa • Activity Teams D. Bennett • Workshop I & II – Update D. Bennett / D. Mills • Cost Clarity D. Bennett / C. Winans • Logistics R. Siddappa / Tom Bolden • Workshop II – Ideation R. Siddappa • Impact & Next Steps D. Bennett

  21. Cost Clarity: Landed Product Costs

  22. Cost Clarity: Three Focus Areas • Standard Development • What are the drivers of cost differences between Merillat & Quality Product? • Overhead Costs • What drives the variance in Indirect Labor and Fringes between Merillat & Quality? • SG&A Costs

  23. Standard Development: Starting Point

  24. Standard Development: Finding and Conclusions on Broader SKU’s • Most Variances are in the CBOX, Doors and Drawer Fronts • Several smaller wall cabinets are priced similarly regardless of brand • Problem with the CBOX variances carried forward predominantly on base cabinets primarily on the Merillat brand • Need to analyze cost detail of CBOX to understand what is driving variances

  25. Standard Development : CBOX Components

  26. Overhead Costs

  27. Overhead Cost: Plant Overhead Cost per Unit $22.06 per box $28.88 per box

  28. SG&A Costs

  29. SG&A Cost breakdown

  30. Current Standards

  31. 85% Facility Utilization

  32. Incremental Costs

  33. Agenda • Welcome & Kick-off D. Bennett • Multi-Family Segment Presentation Ravi Siddappa • Activity Teams D. Bennett • Workshop I & II – Update D. Bennett / D. Mills • Cost Clarity D. Bennett / C. Winans • Logistics R. Siddappa / Tom Bolden • Workshop II – Ideation R. Siddappa • Impact & Next Steps D. Bennett

  34. Logistics: Focus Areas • Inbound Logistics • Where is the origin of the inbound? • What location will outbound be? • Based on the inbound origin options and the outbound origin options, logistics can be optimized. • Outbound Logistics • Possible outbound locations • Density impact • Miles per cabinets impact • Rail Vs. OTR, TL Vs. LTL • Final Mile Logistics • Need to take full truckloads - Define full truckloads i.e. 200, 250 etc… ? • Driver assist/Sequencing load • Driver detention $60/hour and Lay over $250/day • Trailer Drops Charges based on final destination • Challenging locations i.e. City limits etc. • 3PL final mile delivery range $8.50-$23

  35. Current State – Merillat & Quality Deliveries

  36. Agenda • Welcome & Kick-off D. Bennett • Multi-Family Segment Presentation Ravi Siddappa • Activity Teams D. Bennett • Workshop I & II – Update D. Mills • Cost Clarity C. Winans • Logistics R. Siddappa • Workshop II – Ideation R. Siddappa • Impact & Next Steps D. Bennett

  37. Ideation: In-depth Review of Focus Areas

  38. Ideas

  39. Ideas

  40. Ideas

  41. Ideas

  42. Ideas

  43. Top Focus Ideas

  44. Regional Model: Team: Chris Winans, Lanny Pickens, Kasey Harris, Gregg Schweir, Mark Ayers, Dan Smith, Tom Bolden and Kevin Crosby. Team Leader: Ravi Siddappa Objective: To provide a competitive advantage with current manufacturing footprint to support Multifamily price point and product demand. Scope: • Understand product offerings from current manufacturing locations and document product gaps – Dan & MJ: 3/30 • Understand competitive landscape by regions and locations & price point – Kevin/Ravi: 3/30 • Create go to market plan based on Price, Product, Promotion and Place between three alternatives – TBD: 4/9 • Option 1: Discount both Merillat and Quality products to serve respective regions • Option 2: Produce targeted products in 2-3 plants (add OPP to Mt Sterling and/or Culpeper) • Option 3: Option 2 plus open Ocala for limited production into Florida market

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