This privately-held $6 billion retailer and distributor of office supplies distributes its products through more than 100 logistics centers in North America. Its offerings include ink jet, laser and copier paper, toner cartridges, commercial printing paper, packaging systems, and cleaning supplies.

The company was challenged by its private equity ownership to show steady and significant operational and cash flow performance improvements. Investors kept constant, rigorous scrutiny over financial metrics, particularly those that portended high returns.

The company had pursued an enterprise-wide technology implementation as a strategy toward improved business performance that included a major effort to implement an ERP solution. However, it’s lack of success left senior executives skeptical about a subsequent attempt at a similar initiative. Their concerns were magnified by the constant cash flow requirements of private ownership and they were convinced the company could not survive another try.

Working with the Director of Architecture, Quality Deployment (QD) was initially requested to support their business process performance improvement plans through the design and development of the enterprise integration capability.

90-Day Cash Flow Improvement Plan Leads to Huge Returns
QD understood immediately that cash flow was the core business issue and driver to making changes. Our consultants embarked on a series of 90-day timetables and priorities to deliver improved cash flow. QD led the client through the process of identifying opportunities to implement the architecture in 90-day phases, each having the primary focus of generating millions in cash flow improvement.

QD analyzed the method by which 13,000 invoices were processed weekly, involving the additional challenge of researching inaccurate data, cross-checking information received in many forms (paper, fax, scan and email), and dozens of other manual processes designed to manually correct item and pricing information gaps. As these reconciliation practices were unable to address all invoice issues, the distributor incurred discrepancies as high as $50 per invoice as a result. Additionally, QD determined that the distributor’s data synchronization and order entry issues also accounted for 65% of the root causes associated with the issuance of 16,000 credit memos each month.

As part of each 90-day phase, QD developed the analysis to map out and rank operational and technical changes against: 1) High financial return (ROI), 2) Speed to value, 3) Ease of implementation, and 4) Least impact on business people. Targeted earnings, business process optimization, and opportunities for improved customer and trading partner relationships were also considered.

Customer-Supplier Touching Transactions Yield Big Gains
QD teamed with stakeholders involved in each business area to identify the impact of proposed changes. Through rigorous data-gathering and analysis of numerous opportunity areas, our consultants documented and prioritized two recurring themes that would generate the most benefit to cash flow improvement along with the ability to be delivered quickly through the enterprise architecture:

1. Accounts Payable Discrepancies. Inconsistencies in vendor-item information were causing high direct labor costs to research, reconcile discrepancies, and implement corrections, in addition to the service disruptions to vendor relationships. QD provided the solution architecture to electronically enable purchase order-to-invoice reconciliation. This eliminated many accounts payable discrepancies and streamlined the resolution process.
   
   Results: The distributor was able to restructure the accounts payable process using the new architecture design. In just five months, they reduced the need for one-third of their accounts payable and supplier service staff to achieve more than $900,000 annual labor savings.
   
   
2. Excessive Invoicing Deductions. Inconsistencies in customer item and customer order pricing information were causing deductions from remittances (short payment), high direct labor costs preparing and reconciling credit memos, overstatement of sales, and overpayment of commissions. QD electronically enabled the credit memo process so it would tie to invoicing and, thus, reduce these costs.
   
   Results: The client gained more than $600,000 in annual direct labor savings in Accounts Receivable collections, customer service, and credit/rebilling. QD’s design provided for electronic matching of invoices to credit memos to identify root causes and recover cost from vendors and sales people. The client also achieved a two day improvement in their Days Sales Outstanding (DSO), freeing up more than $16 million dollars in cash.

Technology and Delivery
Prior to this engagement, the client had invested in a leading middleware technology platform and recognized that they could leverage this technology across additional IT initiatives.

QD incorporated this directive and led the business case development, business process redesign, technical architecture design, and application analysis and design with the middleware selection as a core element. This process included close, collaborative working relationships with stakeholders.

Service Delivery Team
Quality Deployment is improving profit and cash flow at the world's most successful companies using our proprietary approach to performance improvement through cash flow analysis. Combining unmatched industry depth, technology breadth and implementation experience, we join forces with customers to help leading businesses become even better. With delivery successes in the US, UK, EU, and Asia, the company serves a wide variety of Fortune 500 sized commercial and public sector organizations. Contact us to learn more.