Transforming the supply chain in the face of new disruptive business models (CS215)

Change management was the key to multimillion-dollar savings in a shrinking market

This story is for senior executives who

• Are operating in an industry with a shrinking market and need to combat the threat posed by disruptive business models
• Want to harness the power of data analytics within their organization
• Need help to bring about cultural transformation and redesign their organization

The Challenge

This family-owned, billion-dollar omnichannel mail order and electronic retail company was facing significant headwinds from new disruptive business models.

Operating in a world of declining sales and shifting margins, executives recognized that their future existence was under threat. With a business model that was rapidly becoming obsolete due to changing buyer behavior, the company engaged Maine Pointe to help optimize the supply chain, streamline the organization and solve the problems of excess inventory, SKU proliferation, and above-market freight and warehousing costs. Crucially, they wanted to achieve this without reducing headcount or bricks and mortar.

Our analysis showed that the organization had poor cost control, weak cross-functional alignment and lacked the necessary tools to harness the vast amount of data at its disposal. These, along with a widespread reluctance to change the current ‘culture of consensus’ were contributing to a situation that, if not quickly improved, could prove detrimental to the business.

Maine Pointe helped the company:

• Move from a relationship culture to a performance-based culture that still maintained the integrity of the relationships that were core to the founder's values and vision
• Design an organization supportive of strategic goals through efficiency-based functional alignment, clarity in roles and responsibilities, role specific competencies and key performance indicators
• Work with key incumbents and selected new transportation providers to optimize current freight contracts and secure 
  new agreements
• No longer use a competitor as a carrier, an arrangement which, while saving money, posed a significant risk to the business
• Infuse logistics best practice and taking advantage of current dynamics within their market place to change the way they work within the global environment and ensure competitiveness going forward
• Conduct a detailed rationalization of warehouse processes, ship point, level of service and mode
• Implement new data analytics processes and buy-planning tools that helped aggregate and normalize data from multiple siloed systems to reduce cost, enhance control and optimize inventory levels
• Install a customized inventory management operating system with a heavy focus on seasonal/demand planning to mitigate excess inventory and obsolescence
• Move procurement up the maturity curve away from margin management and towards strategic sourcing
• Create alignment and ownership to maximize and sustain benefits

Lessons learned for other CEOs

• Being focused, aligned and accountable to organizational goals is critical to achieving sustainable change
• The quality of your data and insights is essential to driving operational efficiency and effectiveness  
• A strategic approach to sourcing and best practices in supplier management and carrier relationships can be pivotal to driving change within a business

The Results

• Transformed their internal culture and operating model
• Drove accountability into the organization through strategic job design and results-based performance metrics
• Reduced cycle time by 15%
• Decreased working capital by 25%
• Implemented market leading data analytics to enhance visibility, improve control and optimize inventory levels
• Reduced logistics spend by 7-12%
• Delivered >10% savings on prior year purchases with a clear strategy to generate further year-on-year savings
• Reduced small parcel and domestic trucking costs by >5%
• Improved variable warehousing costs by 10%
• Saved tens of millions of dollars in procurement costs
• Achieved a 5:1 ROI