{"id":188,"date":"2011-01-05T18:56:07","date_gmt":"2011-01-05T18:56:07","guid":{"rendered":"http:\/\/www.department99.com\/bobamter\/?page_id=188"},"modified":"2014-08-26T16:50:03","modified_gmt":"2014-08-26T16:50:03","slug":"case-study-louisville-ladder-division","status":"publish","type":"page","link":"https:\/\/bobamter.com\/?page_id=188","title":{"rendered":"Case Study: Louisville Ladder Division"},"content":{"rendered":"

Louisville Ladder Division, <\/em><\/h2>\n

Emerson Electric Co., <\/em><\/h2>\n

Louisville, Kentucky<\/em><\/h2>\n


\n<\/em><\/p>\n

Situation:<\/strong><\/p>\n

In 1985, Robert Amter was promoted to President of Emerson Electric\u2019s $33 million in sales Louisville Ladder Division.\u00a0 On the surface Louisville Ladder was a successful, high profit manufacturer of industrial ladders.\u00a0 Prior to his appointment, it was not growing because of the following problems:<\/p>\n

Problems:<\/strong><\/p>\n

\u00bb Had lost market share for 4 straight years in its highest sales, most profitable product line – fiberglass ladders.<\/p>\n

\u00bb The aluminum ladder product line had a low market share due to poor product features and high price points.\u00a0 Aluminum was a low margin and high cost product line.\u00a0 A competitive aluminum line is essential for success in the ladder industry.<\/p>\n

\u00bb The strategy for growth was to expand the wood ladder business, its lowest profit product line which had 20 lower cost, high quality regional competitors.\u00a0 Louisville Ladder sold wood ladders only as an accommodation to customers purchasing high profit ladders.<\/p>\n

\u00bb The second focus for growth was on the new, two model molded plastic step ladder product line.\u00a0 An untested product with serious deficiencies affecting safety.\u00a0 There were no plastic ladders in the industry.<\/p>\n

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~<\/strong><\/p>\n

Results Achieved:<\/strong><\/p>\n

\u00bb Louisville Ladder\u2019s financial results while Robert Amter was President:<\/p>\n

Actual Annual<\/p>\n

(000$)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 FY1985\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 FY1988\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 % Change<\/span><\/p>\n

\u00a0\u00a0 Net Sales\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 $33,104\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 $43,512\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0 +7%<\/p>\n

\u00a0\u00a0 Gross Profit\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 13,691\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 17,202\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0 \u00a0\u00a0 +6<\/p>\n

\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 % of Sales\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0 41.4%\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0 39.5%<\/p>\n

Selling, General &<\/p>\n

\u00a0\u00a0\u00a0\u00a0 Administrative Expenses\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 5,645\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0 6,441\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 +3<\/p>\n

\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 % of Sales\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 17.1%\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0 14.8%<\/p>\n

Operating Profit\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0\u00a0\u00a0\u00a0 8,046\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 10,761\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0 \u00a0 \u00a0 +8<\/p>\n

\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 % of Sales\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 24.3%\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0 24.5%<\/p>\n

Pretax Profit\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 8,565\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 11,851\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 +9<\/p>\n

\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 % of Sales\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 25.9%\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0 27.2%<\/p>\n

Asset Performance:<\/span><\/p>\n

Inventory Turnover\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0 2.96\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0 3.83<\/p>\n

Operating Capital Turnover\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0 3.43\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0 3.73<\/p>\n

Return on Total Capital\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0 40.6%\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0 58.0%<\/p>\n

\u00bb Fiberglass Ladders:<\/span><\/p>\n

The fiberglass line offered only one model deluxe step and extension ladder.\u00a0 Distributor councils, meetings with other customers and employees indicated a product line segmentation opportunity for a new lower price point and lower cost fiberglass ladder with reduced features.\u00a0 This was implemented without diluting deluxe sales.<\/p>\n

Louisville Ladder had almost zero sales to electrical distributors, the prime purchasers of non-conductive fiberglass ladders.\u00a0 To correct this fault, hired commission manufacturers\u2019 reps specializing in the electrical channel segment.<\/p>\n

Introducing the new fiberglass models and expanding coverage of the electrical channel segment resulted in an increase in market share of 3 points in two years.<\/p>\n

In addition to increased sales, reduced raw and work-in-process inventories and cost of sales by vertically integrating into fiberglass ladder rail drilling and cutting equipment.\u00a0 Stock keeping units were reduced from 137 to 32.\u00a0 Return on investment was 62%.<\/p>\n

\u00bb Aluminum Ladders:<\/span><\/p>\n

Developed an aluminum line with competitive features and lower price points.<\/p>\n

Reduced cost of sales and inventories by replacing expensive mandrel drawn aluminum extrusions with lower cost commodity grade aluminum.\u00a0 This was accomplished by a $270,000 capital investment into annealing equipment needed to soften the commodity grade extrusions.<\/p>\n

Additional cost reductions were obtained by simplifying the production process.\u00a0 In some instances, by purchasing duplicate equipment to eliminate bottlenecks to through-put and inventory improvements.<\/p>\n

Introduced a new product line, accessories, with a 40% gross profit margin.\u00a0 First year sales were $200,000.\u00a0 Accessories are an important support product line, principally for aluminum ladders.<\/p>\n

Sales coverage was expanded further by appointing manufacturers\u2019 reps specializing in industrial mill supply dealers – the largest purchasers of industrial grade aluminum ladders.<\/p>\n

An additional benefit from hiring manufacturers\u2019 reps was the increase in regional warehouses from 5 to 23, at a low variable cost that did not exceed 3% of the invoice value of the product shipped.<\/p>\n

\u00bb Wood Ladders:<\/span><\/p>\n

There are a large number of small, regional wood ladder manufacturers.\u00a0 Many are successful companies with low cost of sales and a high wood ladder market share in their region.\u00a0 They do not manufacture fiberglass, aluminum and steel ladders.\u00a0 The majority of these companies purchased these ladders from R. D. Werner Company.<\/p>\n

In 1986, Louisville Ladder penetrated this OEM channel segment and displaced R. D. Werner in four wood ladder manufacturers.\u00a0 Prior to 1986, Louisville Ladder did not have sales from wood ladder companies.<\/p>\n

Stopped opening regional wood manufacturing plants.\u00a0 This was a high cost strategy with low margins of profit and a low probability of success.<\/p>\n

\u00bb Other Product Lines:<\/span><\/p>\n

Based on negative engineering test results on the safety of the molded plastic step ladder, terminated development of this project.<\/p>\n

Focused on expanding the high profit aluminum stage and steel product lines.\u00a0 The stage line only required a simple rearrangement of plant equipment to improve the customer service order\/delivery cycle and reduce Cost of Sales.<\/p>\n

Developed a new steel rolling ladder to fill in a product line gap which would be sold to existing customers.<\/p>\n

\u00bb Established tactics to further reduce cost of sales and work-in-process inventories principally through improved product flow.<\/p>\n

\u00bb Galvanized key employees.\u00a0 Many of the ideas and new strategies came from employees.\u00a0 Prior to my appointment, employee participation was not encouraged and respected.<\/p>\n

By 1988:<\/p>\n

~ Sales coverage had been expanded from 10 company employed salesmen to 105 manufacturers\u2019 reps.\u00a0 Company salesmen were reduced to 8.<\/p>\n

~ 12 new products were added.<\/p>\n

~ Fiberglass ladder sales increased 18% in one year, from 1987 to 1988.<\/p>\n

~ Aluminum ladder sales increased 15% in one year, from 1987 to 1988.<\/p>\n

\n

Improved profit margins while achieving sales growth.<\/em><\/p>\n<\/blockquote>\nTweet<\/a>","protected":false},"excerpt":{"rendered":"

Louisville Ladder Division, Emerson Electric Co., Louisville, Kentucky Situation: In 1985, Robert Amter was promoted to President of Emerson Electric\u2019s $33 million in sales Louisville Ladder Division.\u00a0 On the surface Louisville Ladder was a successful, high profit manufacturer of industrial ladders.\u00a0 Prior to his appointment, it was not growing because of the following problems: Problems: […]<\/p>\n","protected":false},"author":1,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"open","ping_status":"open","template":"page_full.php","meta":{"footnotes":""},"class_list":["post-188","page","type-page","status-publish","hentry"],"_links":{"self":[{"href":"https:\/\/bobamter.com\/index.php?rest_route=\/wp\/v2\/pages\/188","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bobamter.com\/index.php?rest_route=\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/bobamter.com\/index.php?rest_route=\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/bobamter.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/bobamter.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=188"}],"version-history":[{"count":8,"href":"https:\/\/bobamter.com\/index.php?rest_route=\/wp\/v2\/pages\/188\/revisions"}],"predecessor-version":[{"id":1440,"href":"https:\/\/bobamter.com\/index.php?rest_route=\/wp\/v2\/pages\/188\/revisions\/1440"}],"wp:attachment":[{"href":"https:\/\/bobamter.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=188"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}