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Project Gold: Multi-Family Solution

Project Gold: Multi-Family Solution. March 20, 2012. Agenda. Welcome & Kick-off D. Bennett Multi-Family Segment Presentation Ravi Siddappa. Market Definition. Senior Housing / Assisted Living. Hospitality – New & Rehab. Military Housing. New Construction: High Volume Apartments.

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Project Gold: Multi-Family Solution

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  1. Project Gold: Multi-Family Solution March 20, 2012

  2. Agenda • Welcome & Kick-off D. Bennett • Multi-Family Segment Presentation Ravi Siddappa

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

  4. 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

  5. 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

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

  9. Team 1: Update

  10. 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:

  11. 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

  12. Project Gold Diggers: Initial Focus Area’s

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

  14. 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

  15. Stimulus for Workshop II • Workshop stimulus was gathered between March 7th and 12th • Related world examples • Revolution concept • Re-expression concept

  16. 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

  17. COST CLARITY

  18. Cost Clarity: Landed Product Costs

  19. 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

  20. Standard Development: Starting Point

  21. 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

  22. Standard Development : CBOX Components

  23. Overhead Costs

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

  25. SG&A Costs

  26. SG&A Cost breakdown

  27. Current Standards

  28. Incremental Costs

  29. 85% Facility Utilization

  30. Logistics

  31. 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 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

  32. Current State – Merillat & Quality Deliveries

  33. Workshop II - Ideation

  34. Ideation: In-depth Review of Focus Areas

  35. Ideas

  36. Ideas

  37. Ideas

  38. Ideas

  39. Ideas

  40. Top Focus Ideas

  41. Regional Model: Team: Chris Winans, Lanny Pickens, Kasey Harris, Gregg Schweir, Mark Ayers, Dan Smith, Kevin Crosby and 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

  42. Declaration of Multifamily : Team: Shawn McNeil, Jeff Park, Diana Adams, Laura Petee, Jim Lind, Dan Smith and Ravi Siddappa. Objective: To create rules of engagement for both internal and external stakeholders (Dealers/Builder Direct) to quote, sell and service Multifamily projects. Scope: • Create rules and standards, which will allow internal stakeholders to manage multifamily projects cost effectively – Laura/Diana: 3/23 • Create multifamily program rules/check list for customers to receive special pricing– Laura/Diana: 4/6 • Qualification of jobs • Controls around cannibalization

  43. Quote to Order: Team: Dave Saylor, Kathy Scott, Sarah Brown, Jay Marks, Jason Adams, Patrice Roe, Jason Fischer, Sheryl Walker and Diana Adams. Objective: To refine process steps and methodology to improve quote to order work stream. Scope: • Drive internal and external facing quoting process for the multifamily bids

  44. Impact:

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