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nGROUP Performance Blog

Consumer Electronics Distributor Case Study

Posted by Ryan Cates on Jan 31, 2019 10:40:00 AM

Client:

A premier global developer, designer, and manufacturer of various kinds of electronic equipment, instruments, and devices for consumer, professional and industrial markets, as well as game consoles and software. The Company's segments include Mobile Communications, Game & Network Services, Imaging Products & Solutions, Home Entertainment & Sound, Devices, Pictures, Music, and Financial Services.

 

Locations:

Carson, CA/Romeoville, IL

Process:

Receiving, Replenishment, Picking, Packing, Shipping, Special Packaging

Product:

Consumer Electronics

Results:

  • Reduced unit-labor $3,500,000+/year or 30+%, Additional $2,500,000 cost reduction through program expansion to second facility
  • 100% on-time delivery over the course of a month for the first time in the facility’s history
  • Increased building’s capacity through redesigned floor plan; eliminating the necessity of rented space during seasonal spikes. Improved inventory control.
  • Specialty packaging functions that were previously being outsourced to contract packagers in-house for additional savings and greater control of their inventory
  • Successful consolidation of multiple facilities
  • Reduced product damage
  • nGROUP brought in a client to sublease underutilized space

 

Story

The client was experiencing waning sales and dwindling margins in their consumer electronics business due to a combination of increasing competitive market pressures, economic conditions in the late 2000’s, and rising operating costs. As part of a broad strategy to improve profitability and ensure ongoing success, the supply chain team was tasked with delivering a $20,000,000 cost reduction.

At the time of the mandate, the client had four distribution facilities in North America. Three were managed by 3PL’s, and one, in Carson, CA, was managed directly by the client. The Carson facility was the primary distribution hub, handling over 50% of the networks annual volume.Get Your Free Productivity Study

The supply chain team identified many opportunities they could pursue to meet their cost reduction goals. One option had to do with the workforce in Carson. The average tenure was 15+ years, and over the course of that time, the workers had been given annual raises and generous benefits. Compensation ranged from fifty to one hundred percent higher than what was currently available in the market.

Shifting management of the facility to a 3PL was considered to address this, and other challenges, but deemed undesirable for risk, loss of operational control, and cultural purposes. The need to reduce operating costs while maintaining control created a unique opportunity for nGROUP.

Success

The client had been introduced to nGROUP’s concept by an existing partner and decided to run a pilot in the receiving department to see if nGROUP could be successful in their environment. nGROUP developed a proposal; agreeing on program objectives, establishing baseline performance, identifying opportunities for improvement, and developing a fixed unit-labor cost bill rate. Once an agreement was in place the client moved all of their employees out of receiving to other areas of the facility, nGROUP took on management responsibilities and began billing on a cost per unit.

The initial engagement in receiving was overwhelmingly successful, and the decision was made to expand the program to the entire facility. One implication and an area of concern for the client was transitioning the full-time workforce to nGROUP, and whether or not it would drive turnover resulting in service interruption.Check Our Our Case Studies!

nGROUP worked with the client to develop a strategy to mitigate these risks. Personnel key to the ongoing success of the operation was identified, compensation packages were aligned to impact those team members minimally, timelines were set, and a communication plan was created. Through the transition, 90% of the workforce was maintained, and the client experienced no lapse in quality or productivity.

Over the course of our partnership nGROUP has consistently delivered high-value benefits through the supply chain organization. As a result of the success of our partnership nGROUP has been nominated to receive the President’s Award.

Competitive Advantage

Over the course of nGROUP’s partnership with this client the concept of a “traditional 3PL” was considered several times, and multiple Tier 1 Global 3PL’s developed proposals to take over the piece of the business being managed by nGROUP in addition to other aspects. In each case, nGROUP’s solution was found to be superior regarding quality, productivity, cost, and flexibility.

Improvement Focus:

The elements nGROUP can leverage for increasing performance vary based on the opportunities presented by each client's operations. Here are a few specific examples of what we’ve had success with at this particular client:

Improvement Focus 1 – Productivity Monitoring and Feedback Mechanisms

Putting a production standard in place is often more complicated than it sounds. How do you create something that is fair and realistic in a dynamic environment where products and layouts are changed throughout the year? Questions like this prevent many companies from having any measurable expectation. In this case, there were some standards in place, but they were not up to date, and there was little feedback given.Click To Speak To A Specialist

Using historical data and putting systems in place to monitor ongoing factors affecting work content nGROUP implemented an effective productivity management model. Labor planning tools provided for better staffing while feedback mechanisms gave the team more insight into performance throughout the shift. Individual incentive pay was implemented to reward high performance and encouraged workers to utilize their time better.

 

nGROUP Productivity Increase

 

 

On Time Delivery Performance

 

Improvement Focus 2 – Slotting Optimization

Throughout the year and over time the product mix has varied as market demands changed. nGROUP continuously evaluates the size and velocity of products coming into the facility using heat mapping, ABC analysis, and adjusts slotting strategy to optimize for space and efficiency. nGROUP’s space optimization efforts have also eliminated the need for expensive outside, short-term storage during peak season.

 

Warehouse Organization

 

 

nGROUP Space Optimization

 

 

nGROUP Space Optimization

 

Improvement Focus 3 – Inbound Department Layout and Process

As the business changed, the outbound staging started to take up more space due to the increase in SKU’s and a decrease in cases shipped per SKU. Eventually staged freight began to encroach on other areas of the warehouse. To remedy the issue nGROUP redesigned the inbound process; shrinking the footprint and increasing the overall efficiency.

 

nGROUP Receiving Transition

 

 

nGROUP Receiving Implementation

 

Improvement Focus 4 – Workforce Transition

The workforce presented one of the most substantial opportunities and challenges. By realigning the wage scale to be more competitive with the market, millions of dollars could be saved, however doing so could result in a level of turnover that would threaten the facilities ability to function correctly. nGROUP worked with the client to develop a comprehensive plan that included identifying key personnel, ensuring their compensation was not affected, and communicating with the remaining personnel positively and openly.

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It was essential to demonstrate to the people being asked to transition that they are crucial members of the team who are cared for, explain why this needs to be done, and illustrate that while they would be receiving lesser compensation moving forward, they would still be well compensated by market standards. The result was a retention rate of over 90% through the transition and 63% of the workers responding that their job had changed for the better in a survey issued after the transition.

Post Transition Survey sample:

nGROUP Difference

 

Topics: nGROUP, warehouse efficiency, performance partners, reduce labor costs, Improving Production Yields, Warehouse Technology, Manufacturing Management, Improve Efficiency, Increase Productivity, Improve Labor Management, Reduce Cost Per Unit, Consumer Electronics Case Study