How Venn Saved a Startup
The good news was that his six-year-old startup had grown exponentially since its launch – 50-100% annually for three consecutive years – and it was poised to become the leading provider in its industry. Customers viewed the company as the go to source for product. It was recognized for its sourcing of new, trendy products; for fast, accurate order processing; and for efficient, responsive customer service. Some of the largest mass merchant retailers, from Target and Wal-Mart to Amazon.com and Costco, depended on Distributoys.
The bad news: Although together the management team boasted more than 50 years of sales, operations, financial and management experience, Ronnie knew the company lacked the infrastructure to ensure continued explosive growth. And with Forrester Research estimating online retail sales of $175 billion that year, Ronnie wanted to make certain his company grabbed its share.
“Gary Grossman was recommended by my most trusted advisor,” explains Ronnie. “We needed a fresh perspective – a team with the ability to identify and address the challenges and road blocks we couldn’t see.”
Venn began by observing, examining and questioning operations, processes, procedures, and metrics to develop an understanding of the company’s strengths and weaknesses. They identified the following areas in need of improvement and implemented solutions designed for the long term.
Cash didn’t flow. Distributoys’ shortage of working capital was due to old receivables. The Venn team helped collect $150,000 at 90+ days. They also established new payment terms and collection procedures to ensure this problem wouldn’t happen again.
Online inventory was offline. The client’s online inventory site was inaccurate and required up to two hours daily to update. Venn designed a custom spreadsheet-based system that worked in concert with the organization’s accounting software. This initiative reduced the management of this task to 15 minutes a day.
“Wherever it lands, that’s where it belongs.” This was the mindset of the receiving staff at the crazy-busy distributorship when Venn got involved. This problem was addressed by purchasing additional shelving and bins; improving the signage and labels on merchandise; and establishing a system for receiving and stocking merchandise.
Profitability wasn’t even on the horizon. Within eight months of Venn tackling Distributoys’ internal challenges head-on, sales at the entrepreneurial company doubled and it reported its first two profitable quarters.
How Venn Ended a Client’s Frustration
Jill, the controller at a Kansas City global automotive parts manufacturer, was desperate for help. A few months earlier, an IT team from the corporate office spent several days on site to implement a major upgrade of the company’s ERP system. Unfortunately, they left her in worse shape than when they arrived.
The data in the old system had been “stuffed” into the new, upgraded system. Part costs, inventory quantities, and variance accounts were significantly off. For the first month of using the system Jill continually discovered incorrect transactions and made adjusting journal entries. But after several months of reviewing the general ledger weekly — and making adjustments — she was frustrated and knew her “fixes” were only creating a bigger problem in the long run. So she sent her boss an email asking for assistance from Gary Grossman and the Venn team. (Jill knew of other projects Gary’s team had handled for the organization and was certain they could get her back on track.)
Jill’s request was approved immediately. The Venn team arrived on site the following week. Within a few days they identified and addressed several key problems that positively impacted the manufacturing process and profitability. A few examples:
- The custom plastic containers used to ship finished goods were not an inventoried part. This meant the containers weren’t included in bills of material. Without an accurate inventory of this part, the company regularly placed rush orders for containers with expedited shipping – at an expense of about $80,000 a month.
- The plant had been accruing freight expense, not recording actual receipts. Their monthly accrual – a number assigned by the corporate office — was $330,000. Venn discovered actual costs were about $32,000 each month.
- The accounting and warehouse departments recorded scrap inventory in the ERP system manually – and differently. The scrap inventory account was always incorrect. Venn created reports using the ERP system that finally showed the true amount of scrap material.
Along with identifying and solving specific problems like those described above, Venn taught Jill and other senior managers that they didn’t have to settle for how the updated ERP system had been configured. “There were issues we thought couldn’t be resolved,” admits Jill. “Venn provided us with the visibility to recognize when there was a problem and gave us the tools to fix them.”
Due to their success, Venn was invited to attend the automotive part manufacturer’s North American company conference and speak to senior leaders about some of the spend issues they had not been able to measure and manage on their own.
To learn more about how Venn Strategy Group can identify your growing company’s strengths and propose solutions for your weaknesses, call us at 847-897-5745 or send us an email.