Replacing a sole supplier in 14 months

The problem

The whole business ran on one supplier. It bought product from that wholesaler's stores, used its inventory, and routed trucks from its docks. In July 2018, with the company at about $75M in annualized revenue, the supplier said the partnership no longer worked at current pricing. The options were to build an independent supply chain from scratch, or shut down.

Why small fixes wouldn't work

Getting better at buying from the supplier couldn't fix a dependency on it. The system itself was the constraint. That calls for a redesign (Kaikaku), not incremental improvement (Kaizen).

What we did

In a two-day event with an owner from every function, the team designed the new system backward from the target state. They mapped five scenarios, from "the supplier does nothing" to "the supplier finds out and cuts us off tomorrow," with target metrics for churn, out-of-stocks, and new customers in each.

A seven-flows gap analysis turned problems into a build list: scrape supplier pricing, set up about 2,800 SKUs in a new ERP, secure a building with racking, refrigeration, and permits, hire and schedule a 35-person crew, and script customer retention for every scenario. Because one leak could trigger the worst case, the work ran as a separate team in a separate office, and a staged worst-case drill tested readiness before go-live.

Fourteen months after the call, the first orders shipped from the company's own 75,000 sq ft warehouse, with its own vendor relationships and its own warehouse and inventory systems. The existing business kept growing the whole time.