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

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

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

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

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
VMI (Vendor Managed Inventory)
Changing the Way Business is Done