Design Strategy

Opportunity 1: Customer Reassignment

NAPA has expressed interest in implementing a standardized approach to updating customer assignments to minimize the number of improper assignments and ensure all customers receive the level of service warranted by their spending. The assignment updating process is not conducted on a set schedule, which leads to customers’ assigned SLA tier not accurately reflecting their spending. This, in turn, leads to resources being diverted away from their higher-spending customers. The customer assignment comprises two parts: store assignment and SLA tier assignment. NAPA district sales managers are responsible for establishing new customer accounts for stores within their jurisdiction. Ideally, the NAPA team aims for customers to be assigned to the closest available store; however, this is not always the case as factors including manager relationships and customer preference may influence the sales manager’s final decision. The NAPA team has indicated that they want customers to be assigned to the closest store to help ensure they have access to the quickest deliveries possible. After being assigned to a store, the customer account is handed over to the designated store manager, responsible for assigning an SLA tier. However, SLAs are not always set, leading to unassigned customers defaulting to Bronze-level service despite potentially spending at a level that would warrant a higher tier. Unassigned customers have the potential to remain unassigned for extended periods as the updating process is not standardized across the network and is ad-hoc on a store-by-store basis.

Opportunity 2: Part Reallocation

Across 52 NAPA stores in the state of Georgia, NAPA is responsible for the carrying and sale of an average of 29,540 SKUs per store with smaller stores close to 20,000 and larger stores around 40,000 NAPA parts. Demand is forecasted on a quarterly basis utilizing Manhattan Associates' supply chain management software for each individual store. After this quarterly forecast, the store managers are responsible for reordering parts that have been sold and restocking their shelves. This restocking and reordering can lead to parts being missing and thus resulting in late deliveries for customer orders. When this occurs, a NAPA driver is taken out of service to go retrieve the part from another store or distribution center to then fulfill the customer order. Finally, this disruption in service leads to late deliveries and ultimately an unsatisfied customer, which is where an increase in customer churn begins. To mitigate this issue, the team created a flagging tool that recommends inventory parts to be moved to stores where they are needed based on demand, in hopes of eliminating the issue of parts not being readily available.

Opportunity 3: Vehicle Reallocation

NAPA’s deliveries to their commercial customers utilize NAPA delivery trucks and NAPA delivery drivers. Currently, NAPA employs a simple rule when calculating the number of vehicles to be assigned to a store: Approximate monthly store sales divided by 40,000. From analysis, this rule was represented roughly when comparing the true vehicle count against the rule’s estimated vehicle count. There are, on average, 1.15 more vehicles than what the rule recommends.

There are shortcomings with this methodology. Firstly, the value of 40,000 used in the ratio was chosen by NAPA based on anecdotal evidence. Secondly, the simplicity of this calculation does not consider differing characteristics across stores, such as the daily number of deliveries or varying SLA tier customer composition. The misallocation of vehicles across NAPA’s store network contributes to two key issues.

1. If a store has a shortage of vehicles, commercial customer orders may not be fulfilled within the delivery time given by the customer’s SLA tier. In this case, reducing customer churn would be the opportunity.
2. If a store has a surplus of vehicles, there is waste. Excess vehicles that sit, unused, in a NAPA store’s parking lot do not add any value. However, these vehicles still cost money to acquire and maintain. In this case, the opportunity is to reduce costs.

To address potential shortages and surpluses, the team created a tool that analyzes the current vehicle count for stores within NAPA’s network and identifies if a store has too many or too few vehicles, and by how much.