Dealing With Growth

Category Health & Beauty
Business Type Online Retail
Study Group Phase 3
Status Completed
Company Name Tuccini
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Having implemented ArgoMetrix e-commerce strategy – Phase 2, Long Island, New York based eTailer Tuccini was now receiving more than 1,000 orders per day. Their near real-time sourcing system provided a vast amount of inventory through strong supplier relationships. Their Amazon FBA Business was now established with strong seller metrics to ramp up revenues and make Tuccini a Top Seller on Amazon Marketplace.

As the order flow increased, the Company was unavoidably carrying inventory to service the revenue base. This meant that a sufficient amount of inventory financing was needed to maintain the growth Tuccini was experiencing. By this time, the Company was carrying over 5,000 brands with over 10,000 unique items. It became necessary to create not just a set of projections, but a revenue model based on past performance and future trends. This was needed not only to maintain growth, but also acceptable profitability, while staying within the inventory financing capabilities of the Company.

By now Tuccini had mastered the IT infrastructure for purchasing and distribution. It needed to expand the product lines from designer fragrances to professional hair care and skincare. Once again, this required analytical data and a new set of vendors that carried these product lines as fragrance vendors only supplied fragrances. Selecting the winning items that were not only high demand but could also be sold profitably was a challenge. Unlike fragrances, these new product lines came with their own set of requirements such as shelf life, lead time in purchasing and others.

In addition, the current layout of the Company’s facilities needed modifications to increase the daily fulfillment capacity. This was key to maximize the potential of the upcoming shopping season. The way the items were stored in the warehouse, how they were picked, packed and labeled for shipping needed further optimization. As the Company expanded its team, the procedures previously put in place needed to be standardized and applied consistently. Training the staff became key for productivity.

Equally, accurate and prompt financial reporting became necessary, to be able to respond to the changes in the economic climate. Tuccini needed more than regular reporting with sales, profitability and expenses. A complete set of Key Performance Indicators (KPIs) were necessary to manage the operations.

The Company also needed a set of protocols to respond to the changes in KPIs and drive the Company’s financial performance. This was critical to align the day to day decisions with the financial model.

We quickly decided to create a financial growth model by analyzing the historical order performance. In addition, we applied our proprietary algorithms to predict future trends. Once this process was completed, we divided the active SKUs base into seven (7) separate buckets to create a model that would project the order volumes, which could be generated by the items carried. We then moved onto projecting the net yield in each bucket by dividing them into five (5) sub groups based on net profitability. This model would allow us to predict inventory financing required while projecting the top line and net profitability.

The next step was to tweak the sourcing engine for the new product lines. Since the system was built to utilize several parameters, we added new factors such as lead time and shelf life to the selection criteria. This enabled the Company to introduce over 5000 Hair and Skin Care items.

Major remodeling of the fulfillment space was next on the agenda. We tackled this challenge by implementing a three (3) prong strategy:

  • Modification of the floor layout to streamline receiving with pick/pack/ship operations
  • Modification of the fulfillment systems for batch processing
  • Placement of new computer hardware to accommodate the intended operations

The first day Tuccini went live, the Company was able to process 1,500 orders within two (2) hours while eliminating possible human errors.

Finally, we introduced a complete set of KPIs that were not only comprehensive but also had protocols associated with each KPI. This turned the Company’s financial data into actionable intelligence for key decision making.

Our actions ultimately resulted in:

  • Full implementation of the e-commerce strategy (entirely automated for all company operations) and rapidly scaling revenues.
  • More than 2,000 orders daily with annual sales exceeding $10 Million in Year 3 from startup, and a growth rate of over 30% per year.
  • A robust technology infrastructure to scale the product lines across multiple categories
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