uestion FINANCIAL EFFICIENCY CONSULTANTS: REPORT ON ACME We were retained by Acme two years ago on a performance related basis, and the results displayed show company performance in the year prior to our intervention, and for the last full year. The company's only product is an exceptionally high quality executive briefcase, and an indestructible picnic hamper is being developed. The company was by no means in trouble before we were retained, but it was felt that opportunities were not being exploited and that performance could be much improved. Here are the salient facts on company performance: Before After (Year 1) (Year 2) Operating surplus Cash flow $1.600m $4.216m -$312m $2.631m Return on equity 13% 43% Return on total assets 10% 15% Inventories of finished goods to output 22% 4% Wage cost per unit sold $220 $120 Material cost per unit sold $157 $90 On all of these measures the company shows a marked improvement. Our strategy focused on several areas. Efficiency and investment: We initiated an immediate investment programme of $16 million which served as the foundation for increased efficiency and at the same time eliminated excess capacity. We cut down on labour turnover, reduced overtime working, increased output per worker, reduced warranty returns and inventory holdings; in fact, we are quite pleased about the JIT system. Expenditure on product improvement was reduced - we reckoned that there was little to be gained from trying to be any more different from competitors. Pricing and marketing: We increased marketing and kept the price steady, although competitors have been reducing prices; the market has been growing strongly so the reduction in market share was not a problem. Overheads: We took a hard look at all corporate spending and decided that the corporate centre needed strengthening. We all know that the company has been dependent on its high quality briefcase in the past, and for three years has been developing the indestructible picnic hamper; we cut back on product development of the hamper - it is a good idea to spread risks by going into a different market, but there is no point in draining profits in untried ventures. There is no doubt that we have greatly strengthened the company and it is well set for future success in a highly competitive environment and that FE Consultants are due the performance related bonus.