Company “P” was a large business with two internal competing businesses with had almost identical products. Sales would take orders from customers within their system and delivered to the customer. They may be sourced from within the sub company anywhere in Australia. The exact same was true for the other internal company. Both companies were trying to maintain their market share and profitability. To ensure they could meet all customer needs they increased stock and cut the cost of delivery to win business.
Upon investigation it was discovered that the two internal companies were continually bidding against each other in a price war and made outlandish delivery promises. Often exactly the same products were shipped in opposite directions across the country when the exact same product could have been sourced within 10 kilometres.
The cost of the additional stock, interstate transhipments and outlandish delivery promises was costing the company in the order of $750,000 per annum. The increased inventory was leading to additional storage costs was also putting pressure on liquidity.
A collaborative ordering system and staff skilling was implemented and almost the entire $750,000 went straight to the bottom line. As a positive spin off customer service levels improved.