WHOLESALER H

Wholesaler H is a medium sized wholesaler of fruits and vegetables in the upper Midwest.  We were doing a study on produce efficiencies in 1997 for FFoods that led us to meet Phil, President of Wholesaler H, to get his view of FFoods.  At the same time I was able to discuss opportunities to assist his company.  However, nothing materialized at the time, but we stayed in touch.

Finally in the summer of 1999 Wholesaler  H people were thinking of either expanding their facility or moving and we were engaged to help them decide.

Like many assignments, this one did not proceed in a straight line.  But more on that later.

Our first tasks were to understand what they were trying to do and project what types of additional capacity would help them the most.  They were interested in costs per unit to handle their products and the cost of servicing their customers.  We spent considerable time documenting this.  They were interested, but it didn't provoke them to change, as what we perceived as possible inefficiencies they perceived as their strengths.  Their product guarantee and liberal return policy might be an example of this.

As we began to understand their business the following points came to life.

--a firm of 150 employees, with sales in the $200 million per year range

--one major customer with 40 stores that accounted for 2/3 of the business

--another 100 individual supermarkets or small chains that bought smaller amounts per store

--extremely quality oriented with extensive programs to prevent quality issues and deal with them after some inevitably happened

--a physical plant that was very limited in physical slots for pallets of products and order assembly space and truck loading doors.  Thanks to this they had “work arounds” to deal with their limitations.  For example, they could force their system to receive loads of incoming product based on what they had ordered so that they would have inventory to pick as soon as the truck arrived, of course creating inventory errors at the same time.

--a union operation where the workers were to take a lot of responsibility for the slotting of product and the organizing of the daily operations.

Immediately the decision making focused on whether to expand what they had or to move.  Since the expansion had big costs and limitations, both expansion and moving were simultaneously investigated.

In the meantime we helped them with pricing for customers and for new business.  We also designed measurements of efficiency.  To our knowledge they were not implemented beyond testing.  Our feeling was that they did not have the patience to debug the models, despite their understanding of the concepts offered and their appetite for the information.

After considerable searching for a place to move, a site did turn up that they could use with some fitting and remodeling.  It was a former telephone company warehouse made available by the consolidations of deregulation and sell off by a major telecom organization.  The site, once fitted to their operation promised to lower their cost of operation and support many years of growth.  So in a brave moment they decided to go forward with the new site.  Needless to say, relying on a single major customer and increasing debt to finance the fitting up carries a risk.

We did a computer simulation for them and offered a layout and operating concept that was accepted by the workers.  We also helped them buy racking and deal with local officials concerning noise, fueling and other points of concern.

The architectural and construction people did an excellent job and Wholesaler H got a beautiful and efficient facility.  Moving in was well planned and executed.

Shortly after moving they had a lawsuit from a competitor concerning an employee providing copies of its sales flyers to the major customer.  It wasn't explicitly illegal and Wholesaler H had no direct role in the distribution or any use of the information from the flyers. Nonetheless the competitor presented an outrageous statement of damages that got everybody's  interest.  We helped Wholesaler H understand how outrageous but yet how serious this was.  No one wanted a trial and after a few months Wholesaler H, the major customer and the competitor settled.

And shortly after the lawsuit was settled the major customer was sold by its owners, which resulted in a brief closure of the stores for redecorating and re-pricing, which was a temporary cessation for Wholesaler H.  Then reduced number of stores reopened still buying from Wholesaler H.

At last contact, Wholesaler H was alive and recovering by selling more items to fewer customers.

This is a classic situation of a smaller business making its way.  They had very strong local operation, probably not one that could be replicated in multiple cities.  They had a beautiful way of dealing with unions and other employees.  Management was spread very thinly.  There was an interest in sophisticated information and systems but insufficient depth of staff and management to see it through.  The one customer situation was an obvious risk but a risk that they had to live with.

To their credit they used our professional assistance very well.