Improved profitability in the import and distribution sector
The import and distribution sector has its own specific requirements. Here is the real-life study of one of our clients. You will discover how our approach can help solve a company’s problems and understand the measures we help implement.
Import and distribution sector: case study
Although profitable and growing, this client contacted us to improve the quality control of its main Asian supplier. Their company imports products purchased in Asia and distributes them on the North American market. However, for some time, there had been several recurring problems with quality. They assured us that they used many quality control systems, but these did not seem to help correct the problem.
This situation created other difficulties. Essentially, with importation being difficult and the numerous returns, the number of in-store products that were out of stock was relatively high.
A diagram of the issues
Taking the urgent problems of our client into consideration, we divised an action plan. Our measures were designed to respond to the pressing issues, build on the strengths of the company and strengthen its weak points. IDEA Strategies put tactics in place for weaknesses in the chain of operations, regardless of their disposition.
As you can see from this case study, we have a multidisciplinary team that knows how to develop effective and concrete approaches. The following diagram was used to establish and target the critical components we worked on that hindered our client’s profitability.
First issue: recurring quality problems
The first step in this mandate was to understand the company’s quality assurance system. A surprisingly large amount of data was collected with a great amount of detail.
This analysis enabled us to identify some sources of the problem. In effect, there was a lack of control from the supplier in Asia. Additionally, we found that new products were more likely to have quality problems.
In discussions with operations managers and executives, we were able to identify another point to work on. Indeed, the words “should” and “if we have time” came back regularly and betrayed the unreliability of the application of good practices that were in place. This led us to examine the company’s methods.
Assessment of business practices
We therefore set up a work team composed of research and development and operations department members. Their task: to reassess their way of doing things. Here are their main findings:
- The majority of quality control time went into data collection, which was too complex and too detailed. Due to lack of time, only urgent situations were treated;
- Data was compiled in a format that did not allow for easy analysis of key issues, resulting in a lack of a medium and long-term action plan to improve the situation;
- The product specifications generated by the R & D department were incomplete;
- The Asian supplier did not offer any control document with its deliveries.
To solve these urgent issues, we proceeded with different measures:
- Modification of the quality data collection system allowing easy analysis of failures by product and dysfunction type (Pareto);
- Identification of concrete actions (WHO, WHAT, WHEN) to reduce the main causes of failures;
- Introduction of more detailed product sheets and conformity certificates to be provided by the Asian supplier before each delivery;
- Establishment of reliable functional tests to be performed during product development and clarification of the steps to be followed.
With a long-term view, we developed the following reflections:
- Recognize that the lack of discipline and the pressure of the moment lead to a decline in quality;
- Review quality control procedures and establish what should always be done (95% of the time minimum).
Having concluded our work, the client noticed significant improvements:
- Significant decrease in “surprises” when receiving products;
- Increased management control over the ”real” development process;
- Establishment of a culture of continuous improvement focused on the long-term solution of key issues.
The client was also struggling with a second issue, as many of its products were out of stock.
The analysis of the problem revealed the following situation:
- A very large number of items was required (more than 20,000);
- Several critical items were out of stock;
- There was a surplus of certain items;
- A theoretical method of need analysis existed, but was rarely followed and there was no clear supply method;
- The time allocated to provision was insufficient for the size of the task;
- The company had an excellent computer system, but only used it at 10% of its potential.
To remedy this situation, the IDEA Strategies team proceeded to introduce several measures:
- Revisions of roles and responsibilities in the purchasing department to clearly delineate purchasing and procurement functions;
- Identification of clear and easy-to-follow performance indicators;
- Setting realistic and measurable goals;
- Identification of problematic suppliers and adjustment of reserve stocks (temporary solution pending a supplier’s solution or replacement).
- Development of some software features to enable more efficient, more detailed and more proactive inventory management.
Over a 6-month period, our client was able to reduce inventory by more than $500,000, as well as decrease stock-outs by 50% on priority items.
We help you optimize your operations
The IDEA Strategies team helps maximize your profitability by developing measures and work practices that optimize your operations. Contact us today so that we can start planning to reach your goals.