This story is for CEOs and PE firms who:
- Are losing revenue because the company’s business model is out of sync with marketplace realities
- Have a time-critical business requiring high levels of customer service
- Are worried that their cost to serve is not economically viable
The Challenge
A wholesale distribution company, with core business in office and janitorial supplies, faced a lack of demand as fewer commercial offices needed their services. Their operating model was based on an older model of same-day delivery and required a large fixed-capacity supply chain network. Their revenue was continuing to decline YOY and they faced a negative profits. They had attempted to lower supply chain costs but were unable to make sufficient cuts to balance the loss in revenue.
While the company had data that could help them manage their capacity, labor, and transportation costs, they were not versed in managing data-driven solutions. The company needed help to accelerate change to progress to “better-in-class” without losing customers. They asked SGS Maine Pointe to clarify and identify their opportunities for improving cash flow and capture growth.
Changing the supply chain, operating, and commercial model to control costs and reverse revenue drain
SGS Maine Pointe:
- Identified and resourced LTL providers for 12.7% improvement on annual spend of $55M
- Provided roadmap to reverse negative 1.0% profitability to positive 2.3%
- Gained 60% savings in transportation at 7 DC by reducing fixed assets
- Developed new inventory stock positioning strategy and an algorithm for projecting daily volume, with fast rollout across the network
- Provided demand planning, profitability, inventory positioning, and staffing tools and models, among others, to increase visibility and allow continuous improvement across customers, DCs, and function
Lessons learned for other executives
- Deep data analysis of competitive and customer climate is necessary for directing change
- Stagnant companies need help to recognize what good looks like
The Results
- $54M in benefits, with $27.7M improvement in profits through warehouse and distribution operations ($17.7M via productivity increases) and transportation ($10M via outbound fleet route and LTL sourcing solutions)
- Provided $27M roadmap for additional savings in transportation fleet services; company has implemented and achieved $25M in benefits to date
- Created 32 business intelligence tools for visibility across commercial, inventory, warehouse, and transportation areas
- Reduced warehouse aisles traveled in distribution centers (DC) by 33%, removing 133 aisles from 22 DCs
- Established new order cutoff time for same day delivery without any loss of customers
- Improved warehouse pick time, slotting, wave planning, and inbound put-away productivity
- Standardized leadership and organization format, resulting in a COE, continuous improvement, and improved organization span of control for leadership to direct associates
- Developed productivity matrix that reduced overstaffing by 20%
- Created outbound transportation cost-to-serve and profitability model giving visibility by customer type, delivery location, length of route, and delivery cycle
- Developed new route day schedule (RDS) strategy roadmap for shipments over 200 miles
Realigning cost strategies to the realities of the marketplace (CS307)
