A midsized national warehousing company who specialized in the distribution of imported heavy machinery components for construction and maintenance of elevator components was facing a huge challenge to their delivery and profitability goals. Their elevator maintenance customer base had made a dramatic shift to the east, resulting in increasing costs and decreasing service levels. In order to meet the demands of this shift, the company was considering moving their Ohio warehouse to Pennsylvania. The elevator maintenance customer typically demanded immediate delivery to repair out-of-service high rise elevators. Blue Pearl was engaged to conduct a site selection analysis and to manage the relocation process. However, the project soon expanded to include broader components to the supply chain.
Our work began with data and metric analysis to identify root causes of the problem. We analyzed the shift of their customer base. Additionally, we looked at regional growth projections and new customer targets to forecast future business opportunities. We also analyzed the distribution of their elevator construction customers to ensure both sides of their business was addressed.
Next, the Blue Pearl team structured a supply chain costing model with sensitivity capabilities that included product acquisition costs, inbound transportation and port charges, storage, handling, delivery, administrative, and tax expenses. We also developed a projection of risks and the associated costs, including labor strikes, weather, and trucking availability for specific inbound and outbound routes. This model was built to test multiple locations, and to balance costs with delivery lead times.
Blue Pearl addressed the issue with a comprehensive plan. First, we needed to implement a data driven approach to measuring customers. Second, we needed to communicate these measures to the sales staff, and realign thinking to customer profitability, rather than just volume or revenue. Finally, we needed to restructure compensation to reward profitability increases. Over a period of several months, we implemented an effective sales strategy that shifted the company’s customer base dramatically, and resulted in the CEO increasing sales staff commissions by 15% based on improved profitability. The sales staff actively participated in customer targeting, and openly appreciated understanding which customers deserved increased attention. One commented “I love not shooting in the dark anymore.” Blue Pearl provided the target, the company hit the bulls-eye.