In 2017, OmniSource USA was a mid-sized tire wholesaler with 18 distribution centers, a single retail location. The company primarily sold Toyo and Coooper tires, as well. The company had recently been formed through the merger of two struggling tire wholesalers, and it too was struggling. Its predecessors sold primarily Toyo and Cooper branded tires, but OmniSource USA also had access to its own proprietary brand, Radar, through its parent company in Singapore.

A bad situation was made worse when cultural misunderstandings led the Singaporean owners to alienate not just many of its American sales people, but also a number of the company’s customers.  The scope of our engagement was to help the company “return” to profitability.

The steps we took included:

Step 1: On the first day, we searched out the inevitable low hanging fruit: pricing at a loss. The company had neglected pricing for several months, and many products were being sold at a loss. We corrected each of those instances and instituted a procedure to ensure that products would only be priced below cost (including carrying cost) with the sign-off of company personnel.

Step 2. We worked with company personnel to identify warehouses that needed to be shut down based on the profitability potential of each location. Ultimately, during our engagement all but four of the distribution centers were closed.

Step 3. Working with company personnel, we identified the profit potential of the various brands the company was selling, and worked to terminate unprofitable brands, and we helped negotiate the return of millions of dollars’ worth of inventory.

Step 4. For the remaining warehouses, we helped company personnel optimize delivery routes. We created price lists based on distance from the route, and in a few cases, worked to discourage unprofitable customers from continuing purchasing.

The end result was that the company had its first ever month of profitability before the end of our engagement.