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Addressing Complex Supply Chain and Distribution Challenges

By Dan Ginsberg, Fred Langer, Steve Katz (host)
Home / Perspectives / Addressing Complex Supply Chain and Distribution Challenges
SMARTER PERSPECTIVES: Retail

In this podcast, Dan Ginsberg of Hilco Performance Solutions and Fred Langer of Getzler Henrich discuss how companies can address and overcome inhibiting supply chain and distribution challenges to drive value creation opportunities.

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Transcript

Steve Katz:

Hi everybody. Thanks for taking time out of your busy schedule to listen in on our Hilco Global Smarter Perspective podcasts. As return listeners know by now, I’m your host, Steve Katz. If this is your first time with us, well then welcome. We’re really glad that you could tune in.

Steve Katz:

Our discussion today is going to be interesting because our guests are here to talk about a specific client engagement and use that to illustrate how companies can address and overcome the kinds of very inhibiting supply chain and distribution challenges that I think a lot of companies are experiencing right now in a way that can help to drive value creation opportunities.

Steve Katz:

That said, we’re joined by Dan Ginsberg, who’s managing director at Hilco Performance Solutions, part of Hilco’s advisory platform, and Fred Langer, who is managing director and head of the operational excellence group at Getzler Henrich, which is a Hilco Global company specializing in middle-market corporate turnaround and restructuring. Thanks for joining us guys.

Dan Ginsberg:

Great to be here Steve. Thank you.

Fred Langer:

Thanks for having us.

Steve Katz:

Well, it’s great to have you both here. I think one of the things that’s so interesting about our topic today is that it revolves around an engagement that was really born out of actions taken by your clients then-owner during the course of the pandemic. I know we’re not going to name that client specifically for confidentiality purposes, but suffice it to say that while those actions were clearly intended to solve a problem, they ultimately created another one in the process. I think that type of catch 22 is really something that’s on many consumers’ minds, many companies’ minds right now, rather, meaning that what are the right steps to take to improve performance and how do you go about limiting the potential for unintended consequences in the process?

Steve Katz:

Dan, to get us started, I’m going to turn to you. Can you tell us a bit about how that predicament led to your engagement by this client evolved and why your and Fred’s teams were brought in?

Dan Ginsberg:

Sure, Steve. As you mentioned, the genesis of this project started when our client was separated and carved out from their parent company, and then their performance issues were exacerbated by some of the features that we’ve become familiar with resulting from the COVID-19 pandemic.

Dan Ginsberg:

To take us back, our client is a specialty retailer of stores across the US. They were part of a larger retail company who had its own challenges and during the onset of COVID-19, they had made a decision to divest of our client’s business and spin it off as a separate company. The real challenge that bleeding off of the companies was that they were originally, both companies were working from two distribution centers that were feeding all of their stores. With the spinoff of our clients, they moved from a two distribution center set up to a single distribution center set up, yet still high storage that they needed to serve. Compounding the complications in that transition for them was the growing consumer demand that resulted from people being home for longer periods of time during the COVID-19 pandemic, just a greater consumer demand across the board for home goods and seasonal items. There was a tremendous amount of challenge in using their distribution operations to fill these stores with a product and deliver product to their customers.

Steve Katz:

Great overview there. Fred, there’s so many companies grappling with and making tough decisions under the gun right now, and perhaps leaving themselves, their divisions, and spinoffs open to problematic consequences as a result. As Dan indicated with that next shopping season is approaching quickly for the client and the instance we’re discussing here, what was your process for getting to the root cause of the issue at hand and determining a course of action. Then secondly, what did you and the team propose and how did you move that forward efficiently?

Fred Langer:

Thank you, Steve. We start out with doing a very granular assessment of what’s going on in the distribution center, including all of their processes, people, systems, data information, the equipment, the facilities, directly and indirectly, dock doors, all the processes through. We then validate whether or not they’re missed revenues or due to what opportunities are out there.

Fred Langer:

One of the keys for us is that we work very closely with the company’s management and associates to determine this and with our lean and six Sigma team, we then work to figure out what is the real capacity, what the bottlenecks are in the retail operations.

Fred Langer:

What we found were processes that really could not handle the volumes that were necessary for them to meet their retail goals. They were missing their retail targets by $100 million a year, even though the inventory was there in containers or on shelves, but they couldn’t put it away or pick it fast enough to get there.

Fred Langer:

Some of the stuff that we looked at was their inbound processes, loading, and unloading, their visual controls, how they put products away, their outbound processes, which really was the key I think to most of what it was. They used to pick the entire in one shot and then have to put it away into all the trucks and with only 40 dock doors, that means that the last dock door was never completed so everything was the entire pick was done, and yet they needed to get 120 trucks out a day to meet their demand.

Fred Langer:

We also looked at having dedicated teams to do some of the non-value-added stuff that prevented them from really doing what was necessary to get the product out the door. One of the keys for us is that we run numerous pilots. When we come up with a solution, we do a pilot run with the personnel in the factory to see that the changes that we’re making are actually what we expected. We work very closely side by side with the employees. We usually do it off shift so we don’t impact the operation. Of course, we had very strong support from the company’s top management in order to make these changes.

Fred Langer:

Significant change, of course, always impacts middle management the most. It’s just essential that they’re part of the process, that they’re involved. Our team is seasoned operational consultants. They work across retail, distribution, operations, logistics, and they’re able to work both onsite and some remotely due to COVID-19 as permitted.

Steve Katz:

Great. Do you find that in working with clients, they have had situations where previous engagements have not included their people in making those initial assessments and evaluations to the level that they’d look for?

Fred Langer:

Yeah. We find most of the time when we go in is that the plans that companies have on their own are usually top-down driven and don’t involve the hourly people. It’s the hourly people that are doing the processes every day. They really understand the process and they’re the ones that need to execute it and therefore to sustain it. The more you involve the hourly people, the better the sustainability is going to be.

Fred Langer:

One of the other key things that we do is that we also make sure that the right metrics are in place so you can measure the results. If you don’t measure the results, you’re only you going to go backward. Sustainability is the key. It’s not just making change, it’s making sustainable change that where companies are going to end up being successful.

Steve Katz:

It seems like getting that kind of buy-in from those folks is key, so that’s great. Dan, just coming back to you at this point, have a lot of conversations with people across so many Hilco operating companies and whether it’s an advisory board services, valuation, monetization, or capital solutions that they’re bringing to the client, one consistent theme that I hear is that many times when the client thinks they need something, it’s not actually what they need and it does not ultimately deliver them the optimal result. Before the podcast, you were telling me a little bit about the fact that that happened here to some extent as well. I’m hoping that you can, what the assumption was versus the reality and then take a little bit of time and talk about why it’s so very important for businesses to gain that expert third party perspective to validate or disprove those types of assumptions that exist in the first place that it seems are often developed in somewhat of a vacuum.

Dan Ginsberg:

Right, Steve. That’s a really good point and something that is kind of between the lines when we talk about these types of initiatives with clients. But in this particular case, as the cases with many of our clients, when we start conversations, they’re typically around a certain type of financial goal that the organization is trying to hit, whether it’s an EBITDA level goal or revenue, or maybe it’s a market value goal if they’re thinking about some M and A, and they understand that there are some operational challenges that are inhibiting them towards achieving that goal.

Dan Ginsberg:

That’s usually the point at which they turn to us to have a conversation about how could operational change deliver financial results that’ll hit our objective in a sustainable way, enable us to grow our business further and that’ll garner increasing amounts of value from our investor community. They often will start with, as was the case with this particular client, they had a bad experience in a prior period when COVID-19 began. There was a lot of disruption in the retail and distribution networks, and there’s a great amount of difficulty getting products onto store shelves.

Dan Ginsberg:

We’re all familiar with what happened with toilet paper and with paper towels and those types of things. Well, similar types of effects happened to all sorts of products, whether they were seasonal or there were punishment items, whatever the case may be, as supply chains began getting disrupted around the world. The client came to us with, we have an indication that based on our performance last year, we will not have the ability to meet demand in our stores this year through our distribution network. That’s simply because we spun off of a business that had two distribution centers, feeding stores, and now we’re down to one. We know that we need to change our processes. We know that we need to change beyond simply re-routing because we have a $100 million revenue hole that we’re trying to fill.

Dan Ginsberg:

We were presented with a challenge at that level, and that necessitated the assessment that Freddy taken you through just a few minutes ago. We started this project with the client and really trying to understand the current state, what the gaps are in their performance today to where they would need to be in order to meet their demand, which was roughly two times the amount of demand that they had in the prior-year period.

Dan Ginsberg:

Through the assessment approach, we were able to put some facts and figures behind the hypotheses, really test those, and validate what the potential impacts would be, and then we developed an implementation roadmap, which we tested with the staff and worked with them on trialing each segment of that implementation plan and refining as we went until there was a clear path to get from where they were today with 40 docking bays and one truck per day and turning that into two or three times of volume in the same day. How are we going to get from where we are now to that feature state?

Dan Ginsberg:

The assessment and the planning stages are critical to truly validating what the opportunities are, and then socializing this with the organization and building confidence around the business case. Then from there, we go into implementation. The implementation is something that our clients very rarely dictate to us how they expect it to be delivered. They trust that through our operational group, we have the expertise and the techniques from a lean and Sigma perspective, as well as other types of methodologies to deliver their results, to train their staff, and to leave behind future processes that their staff can continue forward and even continuously improve upon. Very rarely are we prescribed exactly how to deliver a project, but they want certain results.

Dan Ginsberg:

What was prescribed by this client, which was somewhat unique, was the timeframe. This client was in a very compressed period over the summer leading up into the holiday purchasing season when they needed all of this work to be completed. What would normally take our group anywhere from nine to 12 months to execute, we were able to execute in a four-month period by multiplying our force and having the buy-in from all of the executives and staff at the client in order to be successful in this accelerated timeframe.

Steve Katz:

It sounds like adaptability is critical in this process. You don’t know exactly how long that assessment validation piece is going to take upfront and the client, as you said, may condense the timeframe. You have to have the ability to bring the workforce and the expertise necessary in that timeframe.

Dan Ginsberg:

Absolutely. Flexibility in our ability to adapt to certain conditions are critical to the success of a project, particularly in the environment that we’re in right now, which is illustrated or represented by high degrees of absenteeism of both staff workers and supervisory people. We’ve got limitations in transportation right now due to a shortage of truckers and simply having the management present when needed for all of our interactions has been a challenge, whether it was onsite, virtual, or virtual. Having flexibility to deliver and having that type of bandwidth in our set of resources was absolutely advantageous here.

Fred Langer:

If I can add to what Dan just said.

Steve Katz:

Sure.

Fred Langer:

The speed to implementation really depends more on what the client can absorb than what we can deliver. It’s how fast they can change with everything else they have going on. We’ve had clients that we said, “Okay, we’ll be there one week a month,” because they can’t absorb the change fast enough. We’ve had this certain client where we had 15 boots on the ground for four months to get it done. We are very flexible in the approach based on what the client’s actual needs are and what their capability is to absorb the change.

Steve Katz:

Great. Good clarification. Thanks, and certainly important, I’m sure as you move through these engagements. Lastly, Fred, can you share the kinds of results that you achieved on behalf of this particular client, how you approach transparency with clients overall? I know you talked a little bit about that but in terms of assessing outcomes and forecasting future income impacts rather. Lastly, can you also share with listeners the level of accountability that they should really be looking for and demand in a partner that they’re seeking to engage for an effort like this? Because it sounds like all vendors are not created equal.

Fred Langer:

Really, it’s important that everything that we’ve achieved is validated by the company. One of the first people we engage is the CFO of the company because we’re not going to calculate the results. We want the company to calculate what those results are. If it was a process improvement, then we’re trying to get more efficient or whether we’re trying to increase capacity, it’s not for us to determine that. It’s actually our partner in the company that has to determine that. Our goal is clearly at the end of every engagement is that this client wants to endorse us for the next job.

Fred Langer:

In this particular guy, he’s the vice president of supply chain logistics. I’ll paraphrase what he said in the engagement that he and his team found that we work highly professional and the experience of working with us extremely eyeopening. There was definitely genuine excitement in implementing what we recommended to them. Of course, our recommendations were not just from us, but actually facilitating teams from the actual client. They expressed confidence that they would be able to actually sustain what we gave them and the training that we gave them so that they can take them to the next level.

Fred Langer:

We were very comfortable at the end of this engagement that the client got exactly what they expected and that they were going to achieve their goals as they actually measured the performance over the next calendar year and through that seasonal uptick that they were having.

Fred Langer:

Again, we have to earn those endorsements like that. They don’t just come. Part of it is to try transparency. We meet with the client daily. It’s not like “come back in four months and I’ll show you the results”. We meet with them daily. We have weekly calls with the entire management team to make sure we’re on track. All of that is the only way you can get a delivered product where the people are satisfied with your results. But it really stems from the team that we have. We just have experience that our team has, the role 666 Sigma master black belts, they’re top in the industry. We hold them accountable to make sure we deliver the results for our clients, and ultimately that those results are sustainable for the client. We’ll go back and do a quarterly assessment for the client to make sure we met those goals.

Steve Katz:

Great insights overall guys. In the end, businesses facing these types of challenges are looking for trusted advisory firms, but what’s really going to make the difference and the connection are the people behind a firm’s methodology. As you said, everybody who’s bringing the insights, making the recommendations, and seeing them through. I think you’ve illustrated how your teams orchestrate the many moving pieces of that equation very well for the audience today. Thank you both for that on behalf of Hilco Performance Solutions and Getzler Henrich. You gave us a great perspective. Thank you for being here, Dan. Really appreciate it.

Dan Ginsberg:

Yes. Thank you for having us, Steve. We really appreciate it.

Fred Langer:

Steve, same here. It was really great to be here and to share these insights with your group out there.

Steve Katz:

Appreciate it. How can people best get in touch with you, Dan?

Dan Ginsberg:

Email and phone are probably the best. You can reach me directly at D as in David, [email protected], or reach me directly at 847-504-2454.  Fred.

Fred Langer:

Yes, I can be reached at [email protected]. That’s F as in Fred, L-A-N-G-E-R @getzlerhenrich, G-E-T-Z-L-E-R-H-E-N-R-I-C-H.com. I can be reading on my cell phone 973-902-7585.

Steve Katz:

Well, thanks again to you both. I’m guessing that it won’t be long before you hear from some of our listeners given the current environment and how well you explained everything here today. Listeners, we hope that today’s Hilco Global Smarter Perspective podcast provided you with at least one key takeaway that you can put to good use in your business or share with a colleague or client to help make them that much more successful moving forward. Until next time, for Hilco Global and Getzler Henrich, I’m Steve Katz.

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