Lost Profits – A Product Line Turn-around
A client was facing substantial losses and dissatisfied customers with one of their product lines.
After a careful review and discussion of the problems with employees and customers, Idea Firm decided to work backwards. We began with the delivery and completion of the project to the customer and evaluated every step and procedure working back to the first conversation the sales person had with the customer on day one.
We discovered the product expectations were not explained and established with the customer during the initial conversations with the sales person. After the sale, the operations department failed to order the correct products. It was discovered, that one supplier in particular, was not able to meet the desired quality standards, and unfortunately the inferior product was ordered anyway, instead of sourcing a better quality product.
Delivery of all the products necessary to complete the job became the next challenge. Some products arrived at the company others were scheduled to be delivered directly to the customers location. A big problem was that the inventory list did not specify delivery and arrival time details. Instead of completing the job in one visit, the installation teams had to make three or more visits to each site leaving projects incomplete until the remainder of the components arrived to complete the job.
Projects were continually unprofitable. The company would go out of it’s way to protect it’s reputation by giving customers whatever they wanted, as a result most projects were unprofitable and over budget and several were late. In addition, the sales people were required to visit the customer several times for hand holding to “smooth over” the inadequacies of the installation, diminishing sales performance by another twenty percent.
The central component in the solution had to do with staging and inventorying each customer project at the company prior to the delivery/installation date. We established an area in the factory and labeled each project individually. Every customer order would have all components compiled in advance at the factory. This allowed all the equipment to be reviewed to prevent inferior products as well as cross checking of the project inventory.
A sales checklist and a product line book were developed for the customer and sales person to agree on exactly what was being purchased. The operations department was empowered to be responsible for following the sales inventory list as well as maintaining quality control over suppliers.
We had established a 30 minute bi-weekly team meeting (job meeting) to make sure all the employees were communicating and the projects where arriving and being installed at the customers site within a maximum of two visits to complete the job. Both simple and complicated projects became profitable with a 30-50% margin.