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Kramp: The success behind the ‘Amazon’ of technical parts

Category:
Family business challenges

Date:
7 February 2017

Family business and NPM company Kramp is a multinational provider of parts and accessories and value-added services for companies operating in the agricultural market, forest and grass care sector or in construction and mechanical engineering. Besides focusing on increasing its volume, the company has also taken some important steps towards improving its customer services and increasing operational efficiency. The stated objective of Executive Board member Tom Wolterinck, who is responsible for Operations, IT and HR, is continuous improvement – making things better, one day at a time.

Unbeknown to most people in the Netherlands, the Amazon of the technical parts world is based in the small Dutch town of Varsseveld, located just outside Doetinchem in Gelderland province. This is where you will find the head office of Kramp, a family business established in 1951 and serving tens of thousands of customers across 26 countries from its ten European warehouses. The company ships out around 9,000 orders a day, many of which are delivered to the customer that same night. Its product range includes more than 500,000 unique items, a total of approximately 300,000 of which are always in stock.

Wolterinck: ‘Yes, our company is all about the big numbers – you’ll find that this is an industry where size really does matter.’ But it’s about more than just scale alone – service and efficiency of operations are every bit as vital to Kramp’s success. And as Wolterinck explains, it was in these areas that the company, until recently, fell somewhat short of the mark. ‘We saw a rise in our operating expenses as a percentage of revenue, and although it wasn’t immediate cause for concern, we did want to work towards reversing that upward trend.’

As Wolterinck explains, there were two factors that occasioned these relatively large operating expenses. ‘If you operate in as many countries as we do, you become aware that every country has its own local processes and procedures in place. Some of these are highly efficient, but that’s not always the case.

“We worked step by step and week by week, making small gains every time. This gave the rest of the organisation a feel of what we were trying to achieve.”

The second factor is that our company is divided into business units: Sales, Logistics, Product Management, Finance, and IT. We were dealing with something that has become a classic problem in the business world, where each business unit would strike out on its own to optimise its business processes, but which didn’t necessarily improve cross-functional collaboration between the individual units. The logical solution to both problems is to align your processes and procedures, preferably by working to solve any communication issues on a day-to-day basis. We refer to that here as a “culture of continuous improvement”, where we work to make things a little better every day.’

Streamlining

In Wolterinck’s view, there are – roughly speaking – two ways of setting up a continuous improvement programme. ‘The traditional way is by doing preliminary research over a six month period, then enter a stage of concept development including a detailed design, followed by measures of which you can only hope that, once they’re implemented, they will work out just the way you’ve designed them. This stage can take up to two years, at which point you haven’t even launched the actual programme yet. Since we are partial to more of a  hands-on attitude at our company, we decided on the alternative option: hiring an external consultant and working with them to set up two projects and using a mix of the latest project management tools and methods available (see box –ed.) to start achieving results right out the gate. We worked step by step and week by week, making small gains every time.  This gave the rest of the organisation a feel of what we were trying to achieve.’

Wolterinck’s prime focus at the Varsseveld office is ensuring on-time delivery. ‘We promise our customers that any orders they place today will be delivered the same night, and 90% of the time we deliver on that promise,’  he says. ‘Right now, we’re analysing what went wrong with the remaining 10% of those orders. Was the product out of stock? Might there have been a logistics or distribution error, or was the order placed on credit hold? Were we unable to deliver any value-added services in time, or were we late in issuing the invoice? In some cases, the price might be listed incorrectly in the system. Once you start digging a little deeper, you discover that there’s a potential for hiccups in all these different departments, and that a lack of proper communication between these departments will inevitably cause problems. You can make the order process a lot easier by doing a better job of streamlining the process – the upshot will be a larger number of satisfied customers and  lower expenses.’

The second major project, currently running in Germany, is designed to improve the effectiveness of the Internal Sales department. Wolterinck: ‘We are currently developing a blueprint in Germany for the perfect Internal Sales department, a model which we will then roll out across all the different countries. We will be doing the same with the on-time delivery project: once we have wrapped up this project here at the Varsseveld office, we will redesign our warehouse in Poitiers, France, based on the same format.’

“You can make the order process a lot easier by doing a better job of streamlining the process – the upshot will be a larger number of satisfied customers and lower expenses.”

Logistics instinct

Wolterinck stresses that the challenge his company has taken on is far from being the proverbial ‘rocket science’. ‘These are, at their core, traditional operational excellence programmes, and there is a massive amount of literature out there telling you in detail how to go about it. The real challenge is to implement the new system across a company that generates € 700 million in revenue and operates ten warehouses and 26 sales offices throughout Europe. In other words, you’re looking at a highly complex operation, one where you need to explain to people at each junction why you want to push it through, and what the ultimate gains will be for the company.’

This high level of complexity has nevertheless not deterred him from developing new projects, including an outline of the financial processes involved. ‘We wanted to reduce the time between developing new product ideas and actually being able to supply those products. That’s another process that involves a lot of different channels, and my logistics instinct tells me there’s got to be some waste there somewhere down the line.’

When asked whether he is afraid that Kramp will reach a stage where there are simply no further improvements to be made and the law of diminishing returns will kick in so that any new initiatives will be unlikely to turn a profit, he starts laughing. ‘In a perfectly stable world, you might be right. But the reality is that the world is changing, along with our customer portfolio, our product range and our customers’ expectations. It’s therefore important for our organisation to remain agile and keep up with those changes. So I would describe these  efforts as essential preparation for the future.’

30 minutes

Kramp has enlisted the services of R&G Global Consultants in running its continuous improvement programme. Wolterinck heads up a Circle Team of Kramp employees in his capacity as OPEX Programme Director. Internal project managers and data analysts are recruited from this team, who get together with a R&G consultant to take on the projects defined at a local level. This process is based on the Scrum project management method, with Circle Teams discussing the previous day’s analyses every day with employees from the business  units concerned. A special feature of these Integrated Daily Execution (IDEX) sessions is that they are subject to a 30-minute time limit.

The Circle Teams provide progress updates to the Breakthrough Team, which includes members of the local management. This team also makes decisions on any necessary expenses or investments.

The intention is for the IDEX sessions to become part of the everyday routine, also after the R&G consultant has left the team, Wolterinck says. ‘We are currently setting up a system of daily, weekly, monthly and annual sessions, so as to be able to ensure continuous improvement and really make it part of our company culture.’