In total, Merit Logistics saved a single distribution center well over one million dollars annually. But the real lesson to be found is in the critical role that culture plays in operating at peak efficiency.
A “culture of complacency” had developed in the logistics operation that led to average and, sometimes, reduced production. Performance incentives had been repeatedly reduced by the previous provider in order to meet the parent company’s financial responsibilities. This not only lowered morale and production, but it raised serious questions as to the provider’s true loyalty. Were they working in the best interests of the retail client or the equity firm who owned them?
As an independently owned and financed company, Merit was able to come in and immediately change the organizational culture. And a big reason for that is the way the company treats its associates. Merit retained over 90 percent of the staff of the previous provider and turned them into a highly motivated, efficient and productive team through proper training, better wages and strong incentive programs that rewarded individual accomplishments.
Merit’s positive culture change elevated production which directly led to the remarkable annual savings the client is still experiencing to this day. These specific changes included, reduced client’s direct bill rates by over $1.1 million per contract year, increased associate pay by $1 per hour, and much more.