One of my insurance clients, an importer of components sold to computer networking companies, computer retailers and resellers, hired me to run the purchasing department. Since I was unfamiliar with Oracle’s JD Edwards ERP for purchasing, they started me with the basics: adding part numbers, selling prices, buying costs. Next my predecessor taught me how to use his purchasing report. The sales department had a different report that included a bar chart showing 30-day fill rate percentage. The reps recalculated their commission based on what shipped versus the customer’s order, stimulating them to angrily call every morning and all day long.
During my first day in training, the tally exceeded 180. Recalling my background, I created a back-order incident form: sales rep name, part number. As backorder fill-date dates were updated, I wrote that date on the form and delivered the news personally each afternoon. Soon we boosted the fill-rate 8% by standardizing the product descriptions. This reduced mis-picks, incorrect out-of-stocks, and artificial shrinkage
UPS United Parcel Service contract offered the greatest discount off negotiated rates when we shipped more than $25,000 weekly. The sales floor mantra was “Ship Brown Ground! Keep Costs Down!” Customers, however, wanted faster delivery than UPS ground, so the reps frequently charged ground but upgraded delivery. The freight-out profit center plunged into a cost center. We analyzed the issue with two years of freight-out and UPS data: order number, customer demographics, ship days in transit to delivery, shipping fee revenue, freight-out costs, box weight and box count.
NMF class 50 was the bulk of our freight. On orders with more than eight boxes, a pallet could easily ship LTL. We had the potential to save money while offering the customer a better delivery experience. We undertook two steps to implement this option. First, we created a database in of unit weight and shipping dimension for each product. And sales reps trained on a new real-time report to calculate box count, shipping cost and delivery time by LTL carriers and UPS. More than 90% of the orders shipped UPS at the start of the change. Over 50% went LTL within 3 months of implementation; UPS plunged to about 40% and we almost eliminated air except when the customer paid. Second, we interviewed LTL carriers to identify direct lines, mostly eliminating inter-line agreements to our destinations. We expanded to more than ten carriers who profitably moved our freight. These changes again lifted the sales reps’ confidence, leading them to open up territories all around the USA.
LTL became their competitive advantage.
Inventory rapidly improved as my open-to-buy system was powered through my risk management perspective including a massive artificial intelligence predictive system. After the sales reps learned how to interpret the statistical analyses they applied them to their customers and soon they had customized reports for their use. Their phone time skyrocketed and their customers responded. Sales started rising dramatically. Inventory turn charged ahead from 3 to 8. Monthly sales doubled in less than an 18-months.
When the UPS sales rep told me that our sales were down, I asked him “how did he know?” We were only billing around the $25,000 weekly, whereas we used to spend much more—obviously sales dropped, he replied. Since UPS claimed to touch about 10 percent of the entire country’s shipping, he thought our sales should have been up, based on their internal analytics. But he gave me something to think about.