The Packaged Products Distribution Company (PPD Co.) is a subsidiary of a National Manufacturing and Supply Company. PPD Co. operates as a distributor of packaged products to wholesale and retail markets throughout the country.
The company has grown considerably over the last four years and has opened distribution depots in all the main centres. Wholesalers and retailers call at Depots to collect supplies. An ERP system was recently implemented to streamline despatch and credit control processes.
George Vincent is one of three General Managers reporting to the Board. He is responsible for the distribution network and reports to the Board quarterly on Depot profitability. His other responsibilities include marketing and acquisitions and network development.
Since the installation of the ERP system two things have happened. Firstly, business has continued to expand with high turnovers of both stock and cash. Secondly, the Depots have started to show extraordinary losses in profitability.
At the last meeting of the Executive he was unable to account for the losses from the information he had at his disposal. His information was based almost entirely on computer printouts, generated by the new system. The Board had instructed him to correct the situation and if necessary to engage the services of a consultant to do so.
George had managed to visit all his Depots to assess the situation. At the same time he had asked his secretary to contact four consultants that he knew of. One was an internal consultant attached to the principal company; the others were external, independent consultancies.
The consultants were asked to provide background information on what they did and how they went about it. The secretary scheduled half-hour meetings with two consultants at George’s office.
The stated purpose of the meeting was to discuss a proposed consulting contract to do with training in the company’s depot network.
After brief introductions: Vincent: “I have a problem; actually it’s not a problem but a challenge really. What we need is an expert to analyse training needs and to develop a training programme. Our frontline staff in the Depots has to be trained in how to process data through our Credit Control System, effectively, on time and without mistakes.”
Consultant: “Can you tell me a little bit about how the system is operating and what indicators there are of a “skills gap” amongst your people?”
Vincent: “The system is fine – it cost us R1.68 million and was installed last year by experts. The system interfaces with all our other systems and is very user-friendly.
The “skills gap”, as you call it, comes from the personnel in our distribution Depots -they just don’t seem to understand the need to input invoices, credit notes, receipts, etc. on time.
Actually, it’s most probably a motivation problem, as well. Most of them don’t know how a business works. Maybe if each one of them understood how important his role was in the profitability and survival of the business they would have more reason to be careful. I think we need to include some “motivation training” as part of a course on improving their skills.”
Consultant: “Before the new system was installed, how well was the System working?”
Vincent: “It was fine, but it was taking too long. 5 years ago when we started working on a national basis there were always lags in time because we had to transfer data from one system to the other.
This new system is ‘state of the art’; it interfaces with all our other systems, and cuts down the time lag by 80%. – That’s why we had it installed. It also saved us on staffing. We were able to “redeploy” and pension off some fifteen people who used to spend most, if not all, their time checking invoices and receipts manually.
Installation of the new system means that every Counter Clerk Checker and Controller has immediate access to the computer and can input the relevant data as transactions take place. They just don’t do it right!”
Consultant: “Have all front-line employees received training on the new system – and who did it?”
Vincent: “Good question. Everyone has spent at least two full days in training. The training was done onsite at each depot by the people who installed the system. There’s a Systems Manual in each Depot and the Controllers have all been trained to carry out training courses themselves where necessary. I’ve worked the System myself – it’s easy. Our staff are just not careful enough – they don’t seem to care what they input or when they do it.”
Consultant: “Perhaps you can give me some examples.”
Vincent: “Last quarter we had four of our top customers sent accounts when in fact they were all cash payers. One was even sent a final demand – we lost him to the opposition, a half-a-million-a-year cash customer! In some cases receipts were not posted for two weeks at three of the Depots. Some R600, 000 was somewhere else – not in the bank! That cost us a lot in interest!
Then there’s the big problem of “credit approved” customers. Most of them are big buyers and good businessmen and they don’t pay unless invoiced. We had some R8 million worth of invoices and statements that just didn’t get to the customers for over fifty days. Most of them know they have 30 days before we put them on “cash” so they don’t pay until the last day. I don’t blame them.
Consultant: “Fine, thank you, now could I ask what you see as the main problem and how we would know when it’s been corrected?”
Vincent: “Simple. The main problem is the skills and motivation of frontline staff at the Distribution Depots.
I think what I would like you to do is to get to some of our Depots and find out for yourself who needs training and on what. This is your field of expertise and I don’t want to dictate to you.
Then I would like you to submit a proposal which outlines the problem, as you see it and what training is needed. We would also need to know when you can start training and what the cost of the whole exercise would be.
Consultant: “Can you set a date for a follow-up meeting when I present our proposal to you? I’d like to suggest a fortnight from now as it seems I will need to do some investigation at your Depots.”
Vincent: My diary is pretty full for the next three weeks – can we make it on the 8th of next month at 10am?”
Consultant: “The 8th at 10am is fine. Is there anything else you might want us to include in our proposal?”
Vincent: “It’s quite straight forward really. I want your analysis of the levels of skill and motivation amongst the frontline staff at the Depots and why it is that they can’t process data correctly. I want the whole thing finished -everyone trained and efficient by the end of next quarter.”
Consultant: “I understand. Now can I ask you to provide me with a list of your Depots and the names of the Controllers at each Depot? Also can I ask that you let them know that I am coming and the reason for my visit?”
Vincent: “I’ll get my secretary to give you a list of Depots and Depot personnel as we leave. I’m afraid I have to go to another meeting now so I’ll ask her to phone around and tell them about you. Now I really must go I’m afraid – have you got everything you need?”
Consultant: “Well actually I have a few more questions, but I suppose I can find the answers when I am at the Depots. I’ll report back to you with our proposal and costs on the 8th at 10am.”
Vincent: “I look forward to seeing your proposal. My secretary will make all the arrangements you need with regard to the Depots.