2010 QUALITY INVENTORY MANAGEMENT CASE STUDY
THE CHALLENGE
In the summer of 2009, a two-location industrial textile rentals company realized that their revenue from recovery dollars was not enough to cover the actual replacement cost for their lost and damaged inventory. The loss was particularly painful as the economic downturn hit their area hard. Like most in the industry, the Company was using a standard automatic replacement system for towels but was not charging anything for their flat items. Using the automatic replacement system for bulk items was too expensive for their customers, but the Company needed to find a way to recover the cost of lost and damaged items. Additionally, the Company wanted to make certain that whatever new system was put into place would be customer focused and a market differentiator.
THE SOLUTION
The Company had partnered with Performance Matters (PM) on several other projects before engaging their help in a solution for their recovery losses. After extensive data analysis, Performance Matters found that only 25% of the Company’s goods generated any recovery dollars and 99% of recovery dollars came strictly from towels.
Their analysis led to the creation of a proprietary new method called Quality Inventory Management (QIM) to replace the traditional automatic replacement system while providing enough revenue to cover the replacement cost of both towels and lost or damaged flat items. The new system garnered a lot of excitement when it was rolled out to the Company’s service team. Not only did the new process collect lost and damage charges on products that were previously unbilled, but it also allowed the company to improve their product quality by reinvesting the additional revenue.
THE RESULT
After 18 weeks, the program dramatically increased recovery dollars while maintaining a high participation rate from customers. Before introducing Quality Inventory Management, the Company’s recovery dollars averaged $9,008. After QIM, recovery dollars averaged $14,113, a weekly increase of $6,105. “Insert quote here if applicable,” said the Company’s service manager. “Hopefully insert quote here about how well customers received the new recovery process.”
Before QIM, only 25% of goods generated any recovery dollars and 99% of recovery dollars came strictly from towels. Based on the new system, XX% of goods generated recovery dollars and towels were only XX% of revenue. Over the 18 weeks, QIM generated $109,890 in additional recovery dollars and enabled the company to re-invest dollars to purchase new products.
