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Stanley Black & Decker Morgan Stanley Laguna Conference: Operating over the past 18 months showed them they needed to make some significant changes in their business structure and how they operate so they can focus on their brands, their people and driving innovation. They are streamlining their corporate headquarters to be much closer to the business and running the day-to-day operations. In order to do that, they are delayering their organizational structures. On average, they have 12 layers in their organization structure, from C-suite to point of impact. Research showed them that a typical company their size has seven to eight layers. A truly world-class company has just five. The first step is to pare down to seven or eight, with a goal of hitting three to six. They believe that streamlining will make them a more agile, lean and flexible company that can make faster decisions and move more quickly in response to what's happening in the world. They are very focused on transforming their supply chain. It is too long and relies too heavily on products coming from Asia. Now they are focusing on making more DeWalt and Craftsman products in the US. They want to get back to operational excellence, one of their core strengths, so they can drive continual lean productivity across their footprint. They lost some of that during the pandemic as they focused on meeting much higher levels of demand. Their new supply chain needs to be able to grow the business two to three times as fast as the market overall over the mid-term and long term. That will also allow them to get their gross margin, particularly in the tool business, back up to 35% or better. The outdoor business will take longer to improve the margins. It’s not just about cutting costs, it’s also about reducing complexity by removing costs through very targeted actions. They will take some of the savings and invest them in core growth and innovation. Just 20% of their SKUs generate 80% of their revenue. So they plan to thoroughly evaluate the other 80% of their SKUs and decide which ones are really necessary to meet the needs of end users and customers. They think many of them are unnecessary. They’ve created an automated solution in North Carolina that has about 10 to 12 people on the line because of the high level of automation. But the 2.0 version appears to be capable of whittling that down to two or three people on the line. That brings it down very close to the cost of doing the old line in Mexico. They can produce a lot more product in that automated line, and run it for 24/7 when they need to, and shut it down when they don’t. Their consumer business is actually down slightly from pre-pandemic levels. And they are expecting some pullback in the housing industry next year. Their Pro business continues to be strong and continues to grow. Pros have healthy backlogs. They need to invest more in the front end of the business and are prepared to keep slugging it out with their major heavyweight competitor (TTI). They’ve backed off on the price increase they were going to implement at the beginning of the third quarter because of the decrease in commodity prices. Their main competitor is going ahead with price increases planned for October. Their last price increase was May 1. They want to be aggressive with their major customers and figure out how they can carve out more shelf space for DeWalt and Craftsman. © Robert Bosch Tool Corporation. All rights reserved, no copying or reproducing is permitted without prior written approval.
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