The Goal: a process of Ongoing Improvement

DW: So you could discover theft?
PH: Well, we didn’t call it theft, we called it overconsumption. But of course
it was theft, yes. So suddenly this guy who was responsible for office
supplies had much better tools to go after his dishonest personnel. He’s not
interested in how many pencils someone uses. Everybody knows that people
take pencils home; you do that by accident and it doesn’t cost anything.
Toner cartridges, that’s a bigger problem. So when the theft of these ink-jet
cartridges went up very much, we advised them to buy bigger printer
machines, which we could also supply, to make them different than the
machines people had at home. Things like that. But those cabinets were a big,
big invention. While our customers might have paid 20%-25% more for the
actual articles, the total cost of providing office supplies for their workers
dropped by 50% because they didn’t have the internal hassle of
misplacements, overstocking, and things like that. So they didn’t care that
much anymore about the original price we charged. When I sold my company
a couple of years ago, the due diligence took a long time because they
couldn’t believe our added value.
DW: What were the numbers?
PH: Normal gross margins in the industry were very much below 20%.
Above 20% was suspicious. We were above 30%, which makes a lot of
difference. And we were not ripping people off. They were extremely
satisfied with our service.

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DW: How did you go about selling the concept to your customers?
PH: We had a department which was making appointments with financial
directors, not the guy normally responsible for purchasing office supplies.
That other guy was scared for his job when you came with this solution. And
we made a short movie to show the current situation in their office and how
people were screaming for office supplies and things like that, and how great
it would be if we could take over their stock and their responsibility and solve
this problem. And this worked really great. Something like 30% of the sales
visits were successful sales. Again, the prices we were charging for supplies
was no longer an issue
DW: For anyone?
PH: Not exactly. We still had some customers who were focused on price.
We didn’t chase them away. We just gave them completely different
conditions. We told them that if price is what matters most, you have to buy
big quantities and you shouldn’t care about delivery times: “You can get the
lowest price possible but you have to stand in line.” Now a good thing for us
about the cabinet system was that we had one-week advance notice on our
purchasing needs. I mean, what the customer used last week I didn’t bring the
day I was checking. I would bring it the week later. So I hardly needed any
stock anymore. My suppliers could deliver in a day but I had a week. So now
I could start buying on price. And I could combine my orders with those of
the bigger customers who still wanted to do business just on price.