Mohawk Industries, Inc.
Macrospect Helps Textile Giant Be More Profitable with a New SAC Planning & Analytics Foundation.
Company Overview
Mohawk Industries is a $10B leading global manufacturer of commercial and residential flooring headquartered in Calhoun, Georgia. They design, produce, and distribute carpet, wood laminates, vinyl, tile, and countertops. These products are manufactured in 18 countries. They sell to markets in 170 countries, through six different sales channels. Over the last 20 years, they have made more than 40 acquisitions making them the largest global manufacturer and distributor in their industry.
Situation:
Mohawk Industries’ planning, forecast, and analytics was disjointed from years of acquisitions (45 since 1992). Mohawk did not have a harmonized planning foundation with a usable view of information across all business units. Because of this, the Finance team struggled to make accurate, fact-based decisions in their forecasts. The inability to see at a deep and detailed level across the businesses was also posing planning challenges. Mohawk decided to implement a modern xP&A Finance foundation to reconcile years of M&A that resulted in siloed information and did not lend itself to broad collaboration across different functional areas of the company.
Action:
- Create a collaborative approach to visualizing each business unit based on consistent data and KPIs.
- Align product costing methods that were impacting profitability and manufacturing decisions.
- Include planning experts from different functional areas including plant operations, HR, and sales for a more complete view of information.
- Develop visible, reliable, and consistent measures of labor variance across all business units.
- Enhance Mohawk’s ability to pivot to more profitable business activities via a common view of planning and performance management.
Results:
Mohawk Industries NA now has an extended, modern Planning & Analytics (xP&A) foundation with SAC. Their new organization-wide planning process allows cross-functional collaboration that includes field planners.
Macrospect’s approach to projects (MAP) allowed Mohawk to precisely identify how to rationalize the number of cost centers for planning and see gaps in their process and drivers across all business units and bring them into alignment. They now include external data sources to improve their planning content and have the use of predictive analytics to improve planning accuracy. Utilization of driver-based forecasting allows the finance team to answer measurable, detailed questions for higher level decisions. What was once a difficult question asked by their CFO, “How much raw material inflation do you have in your forecast?” can now be confidently answered with the driver-based forecasting that was built into the new tool. They can acknowledge and see concrete percentages. Clarity of the real numbers was achieved.
Benefits:
Impact:
- Better product costing
- Accuracy is improved between business units, products, and channels by aligning on measures and metrics thus improving profitability.
- Better knowledge of product profitability changes focus on manufacturing and which products to sell when, where and to what channel.
- “We might think a product GM is 28% when it is really 23% once we get everything dialed in accurately by people who really know their data set [by function].” ~Ryan Bishop, Senior Director FP&A, Mohawk Industries
- Greater accuracy improves utilization of cash to improve profitability.
- Better visibility into labor variance
- Sourcing of raw materials per product could change or a product be eliminated or sourced from an outside vendor.
- Many drivers can now be visible, reliable, and consistent across the company.
- This will drive a deeper understanding of the variance and what decisions need to be made based on the variances.
- Improved product line investment decisions
- Increase/decrease production based on better view of product profitability.
- Potential to eliminate a product all together based on accurate data.
- Better cash flow allocation
- Better planning precision will allow the company to free up cash for more investment into high performing products/channels/regions.
- Common foundation for planning (previously non-existent)
- Organization-wide planning processes that required cross-functional collaboration and included field planners can now be done.
- Inclusion of external data sources improves planning content.
- Use of predictive analytics improves planning accuracy.
- Assumptions are now concrete and measurable from bottom to top.
- Previous 80% preparation/20% analysis is now 80% analysis/20% of time doing preparation.
- Utilization of driver-based forecasting allows the finance team to see and answer measurable, detailed questions for high level decisions.
- Macrospect’s approach to Projects (MAP) allowed Mohawk to precisely identify:
- How to rationalize the number of cost centers for planning
- Gaps in process and drivers across business units