We recently hosted a webinar with Oswald Abrahams – executive IT, and Luvuyo Mgidlana – commercial and operations director of Plumblink, where we unpacked their inventory and warehouse management journey to date. They’ve learned lessons along the way that could add value to companies embarking on a similar journey. This article discusses the challenges they faced, the steps they took, lessons learned, and the success they achieved in their operations.
Plumblink is a leading South African plumbing, bathroom, and kitchenware merchant with more than 10 000 products sourced from over 600 local and international suppliers. Plumblink is part of the Bidvest group of companies.
In this article
- Challenges faced
- Technology selection process
- Change management
- Research and narrowing down solutions
- Operational benefits
- Return on investment
13 years ago, Plumblink had 22 stores that were operating under a decentralized model where each store managed its procurement and deliveries. With this decentralized approach, it was difficult to know what was happening at each store, and there was a distinct lack of data and visibility into these locations. A decision was taken by the team to change their operations model and to have a central warehouse distributing out to the locations. They increased the capacity of the warehouse by installing racks and shelves, but the complexity of managing the distribution from a central warehouse became a challenge- this was when Plumblink decided to explore warehouse management solutions.
Their biggest challenge at the time was the silos of information sitting on various platforms across the business. The use of spreadsheets became problematic as the manual interpretations & editing of information were inefficient, and the propensity for human error was high. Using ERP data and spreadsheets to manage their inventory forecasts and replenishments was proving to be inadequate. With 10-15% of their inventory being imported, the complexities around managing suppliers and lead times, and the growing number of locations and SKU’s soon became evident that they needed to look at inventory management solutions.
Technology selection process
“We acknowledged early in the process that we are plumbing suppliers not IT specialists, and we don’t have the expertise to manage servers, installations, and updates. We prefer to ‘stick to our knitting’ and leave the technology to the experts. As a result, the need to look for cloud-based solutions became apparent”, said Oswald.
Luvuyo added, “Of course the other big benefit of cloud solutions is that you can connect wherever you are 24/7 via multiple devices. This benefit we have seen to be invaluable, especially recently, with the need for staff to work from home due to COVID-19.”
Another crucial factor that Plumblink identified early in the process was how to tackle change management. “The whole subject of change management has become a bit of a cliche. When we speak about software implementations or even the implementation of different processes, change management is often underrated. What we found during our journey was that the change management process had to start with top management. Once our top management bought in, it was relatively smooth sailing to filter that down into the rest of the organization,” said Oswald.
Luvuyo expanded, “It’s important to involve all departments in the process, not only IT and operations – you need to get buy-in from finance, HR and marketing/sales and make sure that everyone’s expectations are aligned.”
Research and narrowing down solutions
Plumblink adopted a formal approach that held them in good stead throughout their research process. Oswald explained, “We wanted to look at best of breed systems to align to our ERP. We identified what we needed in terms of features and functionality and mapped them to systems available. This process took a lot of time, but we were able to narrow down our options. We involved our DC managers and other stakeholders in all product demonstrations, and they were part of the process from the outset. When it came to requesting demonstrations from the various vendors, we were clear that we weren’t interested in a sales pitch. We wanted to see the practical side of the system and how it will benefit us.”
Luvuyo added, “What helped us narrow down our options was that we knew what we didn’t want. We didn’t want a Mercedes Benz with all the bells and whistles that we would never use. We wanted a Toyota Corolla. We wanted a robust, best of breeds solutions to integrate with our ERP and handle our operations. We needed a solution that could identify the product, pick it quickly and correctly, and distribute it to the customer or branches.”
Luvuyo said, “Before COVID we were opening around 10- 12 stores a year. Of course, the more stores we opened, the more volume we needed to handle in our Distribution Centre. Interesting and unexpected was that even though there was a huge increase in volume, our labor increase was minimal. We went from 15 stores in Gauteng to 53 with the same number of employees on the floor. The only thing we added was extra vehicles and, of course, more drivers, but in terms of our pickers and receiving staff, those have remained the same numbers over five years, even with the growing volume. This has been a direct result of warehouse automation. Another benefit we have seen has been on inventory write-offs. These were costing us a fortune. Now that we have correct policies and procedures in place with our inventory management, our stock write-offs are down to approximately 1% of our inventory value.”
Another significant benefit that Plumblink has had has been on stock takes. They used to spend 2.5 days counting their warehouse inventory. Typically they would shut down the warehouse on a Friday and start their count, often only finishing up on Sunday. This added not only additional resource costs, but they were also forfeiting a day or 2 of trade. “Changes to the layout of our warehouse brought us huge benefits, and this is where we see Netstock and CQuential working in harmony. We used to keep all our products together; for example, all PVC would be in one warehouse section. However, it later made more sense to have the faster-moving items in front of the warehouse so we could deploy our resources in the right areas and get the best utilization from our staff. Through the data we obtain using Netstock, we can identify our fast-moving items and situate them accordingly. Similarly, the slow-moving items can be identified and kept at the back of the warehouse. Our staff quickly saw how much faster they could perform their duties, and bought into the change.” said Luvuyo.
“Netstock introduced us to a new set of inventory classifications, continues Oswald, that has allowed us to dramatically improve our efficiencies as we can focus our attention on the inventory that has the biggest impact – the inventory that our business relies on.”
Luvuyo added, “We continue to focus on three areas in our inventory, first and foremost, reducing stock-outs as this has the most significant impact on customer service. Second, managing our overstocked items as these cost us money and, lastly, managing our stock days. On all these areas is where Netstock adds massive value.”
Return on investment
Like any other business, Plumblink is required to measure their return on their investment. Most of the ROI needs to be financial and should either be measured in terms of increased sales or decreased costs. Luvuyo explained, “Our highest overhead (other than rentals on our properties) is labor. As we grow our top line, we don’t want to increase our operational costs. Due to the operational efficiencies that we have gained, our staff are more efficient in their work, and we have been able to open more stores and warehouses without increasing our labor costs – this has seen a massive ROI for us. On the Netstock front, we can avoid stock-outs that cause us to lose customers, and we can balance our inventory investment into the right products.”
In summary, three primary identifiers became evident for Oswald and Luvuyo in their journey:
- Look for best of breed solutions that are cloud-based.
- Select vendors with a high level of customer engagement, service, and success.
- Involve your top level management and all stakeholders from the outset.