In the business world few things are as scary as change. The very
thought of an upcoming change can be a distraction at all levels of an
organization from entry-level to C-level. One of the main reasons for the
disruption and productivity is that employees understand the way things
are currently done that have no idea how things will be done after the
change. They often fear that the success they have enjoyed in the prior
work may not produce the same results with the change has happened.

Here is a case study about the implementation of the new
Vendor
Managed Inventory (VMI) program at Kmart. The poster for part of the
program was transferring the creation of purchase orders from Kmart’s
own manage staff to allowing the actual salespeople to write their own
purchase orders.

The Symptoms.
Although some people of the program from the get-go others were
afraid allowing Kmart suppliers to write their own orders would lead to
over purchasing merchandise to make the salesperson look successful.
Not everyone took this point of view. Many of the buyers have full faith
and confidence in their suppliers. They felt that the suppliers would act
responsibly in order to maintain good relationships with Kmart.

Opponents of the program felt that sales quotas for vendor overstocks
were too tempting to allow consistently proper orders.

The Diagnosis.
Actual results of the program were strong however there were
exceptions to peak performance. Through critical analytical thinking it
was realized that the caliber of the individuals placing orders crossed a
broad spectrum. Some companies the orders were being placed by
individuals directly accountable to the salesperson while another
company’s customer service handle the ordering. Those reporting to the
salesperson seemed to only be as good as a salesperson’s desire to build
strong business. Some were taking advantage of the process but for the
most part there was a true dedication to long-term performance. The
same results coming from those working the customer service
department.

Upon further examination it was learned that the different thought
processes of the manufacturer versus a retailer could create situations
where the retailer would see themselves as being overstocked. Often
these were the results of the desire to create full pallets or full layers
within a pallet.

Also the process to create turn at a manufacturing or distribution center
level were radically different than the methodology used to store level.

The Prescription.
Because individuals placing the purchase orders are no longer Kmart
employees and under direct management of Kmart executives it was
determined that the best approach would involve superior
communication. The newsletter was developed to drive competition
between companies and to provide an educational forum through which
all those placing orders could learn.

The communication could not just go to the suppliers because Kmart’s
own staff also needed to learn about the performance within the
program.

A weekly newsletter was developed for the program’s early days. As the
educational curve improved the newsletter was changed to a monthly
periodical.

Future Prognosis.
The understanding of the program increased at all levels of internal and
external management. Those consistently performing at the low end of
the scale were given opportunities for improvement. Eventually someone
have to be replaced at some companies are dropped from the program
entirely.

Despite these isolated poor performances, the supplier base as a whole
one of the program to succeed in companies took great pride in their
participation in the program. Statistically the program was a tremendous
success as store and stock rates increased while store level turn also
increased.

Use this case study during workshops, coaching sessions, self-
development, or team meetings about:

"Dr. Max" shares his success stories by looking at the symptoms of a
business problem or opportunity, his diagnosis of same, his prescription
for success, and the prognosis for the future. For more case studies,
click here.

©2016 Max Impact, Rochester Hills, Michigan, USA
Changing the way
business was done