After recently investing in two specialty electrical retailing companies, a private equity group wanted to know if it could combine both companies’ operations into a single network. It wanted to analyze the distribution processes, facilities, and network to see if the consolidation would be a plausible solution.
Company

The company is a private equity group specializing in middle market leveraged buyouts, recapitalizations, and partnership financings. The firm invests in companies with enterprise values between $200 million and $1.3 billion. Two of its investments were in related specialty electrical retailing and service companies in Europe.

Challenge

Given the similarities of the product, services and markets served, could there be greater leverage by combining the operations into a single network? The two companies approached their distribution operations with dramatically different strategies for labor, owned/leased facilities, automation levels, IT systems, and transportation policies.

Tompkins International's Role
  • Evaluate two companies’ distribution processes, facilities, and network to determine if they could be combined into a single network. Determine best practices, changes required to integrate operations, assessment of facilities, and development of recommendation on investments, timing, facility selection, and road map for moving forward.
  • The evaluation included: Combined retail store networks for multi-stop deliveries; local variation of labor costs and productivity; impact of automation versus space, labor, and productivity; compared various tiered distribution models; and assessed various policies and procedures.
The Results
  • The best approach for long-term consolidated distribution operations identified significant savings, including: reduced labor costs by 27%; lowered cost per line processing by 28%; saved 13% in overall transportation spend; reduced facility requirements reduced by 27,000 square meters
  • Improved home delivery service by consolidating volumes to transit points
  • Indicated that inventory visibility and tracking could be significantly improved through upgrade of warehouse management system (WMS) to activate existing capabilities
  • Identified economic value of relocating some of automated material handling equipment
  • Made recommendations to leverage the high value management skills in the consolidated operations
About the Author
Tompkins International Staff
Tompkins International Staff