The manufacturing operation was managed by a Chinese General Manager who had an operating philosophy much different than the Western company. The Chinese facility had minimal transparency of financial reporting, limited processes and systems for forecasting sales and marketing, procurement and supply chain needs, manufacturing and inventory data, etc. As a result, the first owner had made infrequent cash injections based on the minimal P&L data which he could extract from the Chinese GM and to meet existing operational and fixed costs.

As a result of the acquisition, the Western firm was now responsible for all outstanding and future contracts signed by the General Manager - contracts with employees, vendors and partners, outside third parties. The Western firm had not performed a thorough Due Diligence of the China operation but had assumed the prior owner had managed the facility well.

Challenge: Client needed to obtain a better understanding of the capabilities and weaknesses of the facility in order to determine if and how they would integrate this plant into the organization. The American company did not have senior executives with extensive operational and trouble-shooting experience in China and hired East West to assist them in this effort. Additionally, immediately after the acquisition, the Chinese firm began requiring regular monthly cash injections from the American parent company to remain solvent and the GM added additional personnel in a business which was not making money.

Solution: East West recommended and performed a multi step approach:

1. Conducted an Operational Audit of the existing facility to evaluate the health of the business, operational capabilities, business processes for Sales & Marketing - Supply Chain and Procurement - Manufacturing - Operations - IT, evaluation of senior executives, and financial and contractual risks.
2. Based on the Audit results, EW made a series of detailed recommendations to restructure the operations in order to restore the financial health of the business.
3. EW implemented these recommendations, including replacing the GM with an East West Interim GM (IGM) well-versed in the Western management style of the American company. The Interim GM was native Chinese and was a former Plant Manager in China for a Western company.
4. The IGM was given full management responsibility, and immediately began improving the company's operating standards. Since overall P&L health was their primary focus, the IGM implemented a series of business processes for the organization and financial data reporting procedures.
5. The IGM also implemented a number of operational processes designed to bring greater efficiency as well as highlight weaknesses with their procedures. For example, in reviewing the sales and marketing processes, the IGM identified weaknesses in sales process and distribution channels - thus, he worked with the existing sales team to correct these procedures and identified an additional distributor.