Removing cost and errors from a multi-million dollar supply chain
Staples NZ aims to be the one-stop shop for office furniture. The company doesn’t manufacture products but sources them from a range of local and international suppliers. Unfortunately, a lack of visibility in the supply chain was making life difficult for staff and customers. The admin overhead and expense caused by mix-ups in delivery was simply not acceptable.
It was time to start managing the supply chain more effectively.
The business issue
Staples NZ does not manufacture anything. Instead, its business model depends on sourcing a range of office products from local and international suppliers. Their customers range from large state sector organisations and national businesses to smaller industry groups and SMEs.
The office furniture division was growing fast but constrained by lack of supply chain visibility. This lack of visibility generated a lot of noise, such as “he said, she said” repeat conversations, telephone tag, and time wasted in finding and updating disparate data in the order fulfilment process. A variety of labour-intensive systems were in place to co-ordinate all the people and activities required to deliver office furniture to a customer. This included multiple Excel spreadsheets and MS Outlook for scheduling.
The root of the problem was the absence of a connection between suppliers, Staples and the customer. Staples account managers were unable to check the progress and status of a purchase order in the system. Neither were there any mechanisms to give or receive feedback. In short, there was no easily accessed way to make and track commitments.
The result was that things would fall through the cracks, or worse, the Staples team or suppliers would drop the ball when trying to deliver on their promises. In such systems, even a 5% exception rate generates many hours of extra work for everyone involved.
Staples’ legacy ERP system (like most) was not designed to manage communication and co-ordination of supply chain partners or track interaction with customers. This situation was inefficient, with many hours wasted on phone calls and emails checking the whereabouts of furniture orders. There was little accountability and co-ordination was erratic between each of the parties.
This led to flow-on effects in the business. The cost of order fulfilment was increasing, the time taken to delivery was growing, and sales opportunities were being missed. At the same time agreements were not being made or kept and customer dissatisfaction was higher than acceptable.
To enable Staples to deliver on its service promise of being easy to do business with, the company needed a system that would measure and monitor the performance of their processes and that of their suppliers. It would need to be a real-time, day-by-day, shared workspace that let everyone know the sales fulfilment process was on track. Any exceptions could then be quickly and easily renegotiated, and managed to completion.
Our consultants worked closely with Staples staff to ensure the customised Connect5 system would closely match the Staples system for managing work. The Connect5 and Staples project team even built a ROI business case for the Staples executive team to assure the solution had clear financial benefits. Once approved, the system implementation from design to go-live was just five weeks. The project was completed on time and within budget.
One of the system’s core features is the ability for each party in the supply chain to make and manage their commitments to their ‘customer’, whether internal or external. This fosters a culture of responsibility and ownership of performance.
Because Connect5 is web-based, each party in the supply chain has an approved level of access and is required to make and keep commitments based on the service level agreement. The goal is for each Staples customer to receive their office furniture on time, where they want it, to personalised specifications. The end customer is able to declare their satisfaction and the order can be signed off as complete in the system.
If a problem occurs, there is an agreed set of actions that must occur (via the software and messaging built into Connect5) that enable all parties to commit to new actions and times. These are tracked and measured against the original agreement.
Additional functions allow for reporting on response times, fulfilment of service level agreements and key performance indicators. Perhaps more importantly, the Connect5 system allows for management by exception, thereby minimising expensive administrative involvement. So if everything goes well, the systems simply show completion of an order. Where there is an exception, or exception events occur repeatedly, then the pattern of these can be tracked and action taken to deal with the root cause. Examples include sales people over-committing, manufacturers under-ordering stock, or deliverers and installers consistently not meeting time frames.
The system enables agreements to be made in real time and shows all shared public interactions (permissions based) of work stages and exception status. This enables Staples staff, suppliers and customers to commit to supply and delivery times, confident that everyone involved has visibility into each stage of the process.
Connect5 has freed Staples resources previously consumed in ‘fighting fires’, and enabled them to be applied to improving customer contact and growing sales. The proof is a three-fold increase in sales revenues, without increasing head count in back-end staff.
The costs of administering supply have decreased. Anecdotally, there is increased satisfaction, not only from customers but also suppliers. Suppliers can now be acknowledged for meeting their commitments or their performance can be ‘fine-tuned’ against the agreements made.
BAM (Business Activity Monitoring) provides real data for performance discussion and coaching at all levels of the supply chain. Over time, as commitments are made and kept, the various parties develop a deeper trust in working with each other. This level of communication, coordination and commitment dramatically reduces the transaction costs between businesses. Service Level Agreements (SLAs) and Key Performance Indicators (KPIs) in contracts are negotiated up front and loaded into the Connect5 performance dashboard for real-time reporting feedback.
From a customer’s perspective, Staples staff are able to self manage most of their inquiries and update the status of their order, with customised views, and scheduled reports. So purchasing officers and store managers can track supply of product into their organisations either by web access or by automatically generated reports that are emailed to them. The system can advise account managers and give them the ability to track deliveries so they can deal with any exceptions requiring their attention. This helps them to proactively service their customers.
Using the Connect5 platform, Staples’ costs of sales and customer care expenses have been reduced, along with the costs of acquiring and retaining quality suppliers. By using this online, real-time workflow tool, Staples has gained a competitive advantage in the cutthroat office supply market.