Consumer product companies are facing unprecedented business demands from their retail partners. As revenues and margin pressures continue to be more challenging, having an extremely efficient operating platform is often the difference between profitability and loss, or even survival, said Gary Herwitz, Founder and Managing Partner of Cometrics Partners, a New York City-based management consulting firm. Named one of the 50 “smartest” companies by The Silicon Review, the firm offers strategic advisory and supply chain management services to consumer product distributors including but not limited to apparel, accessories, footwear, electronics and toys. CoMetrics works with successful firms seeking to maximize profits through operating efficiencies as well as troubled companies that require turn around/crisis management services.
“We have a unique skill set to synergize Operations, Finance and IT,” to drive profits, Herwitz said.
The lack of synergy is understandable. Few CFOs have a strong background in operations, while operations executives rarely are financial and management reporting-focused. Somewhere in between is IT, which reports to either the CFO, Operations or even the President.
“To maximize operating efficiencies these three groups (who often operate in silos) must work closely together,” said Herwitz, a former President of one of the 20th largest accounting/consulting firms in the United States, as well as an apparel company CFO/ COO, who founded CoMetrics in 2009. “Many companies have great design and product, but you have to be efficient. Money is made these days as much in the operations as the front end of the business.”
CoMetrics’ client relationships generally commence with referrals from satisfied clients, as well as banks and factors hoping to help a struggling borrower. Typically, CoMetrics begins by visiting with the company for several weeks, examining every aspect of the operations.
“Most engagements begin with a Business Diagnostic. We do a huge amount of data analytics, then return with a report to management of where we think the challenges and opportunities are,” Herwitz said. In middle market companies, often business owners and their key management team are consumed with day to day, transaction by transaction issues and lack the time, and perhaps the independence, to step back and objectively and unemotionally evaluate their business. “That’s where we come in,” says Herwitz, “we bring a perspective that simply put is difficult to obtain internally.”
CoMetrics also works with companies on their e-commerce strategy. There is a confluence of issues for companies that know they need to grow their brand online yet they must co-exist with their retail partners.
“Designer fashion companies are dependent on the big four department stores—Neiman Marcus, Nordstrom, Saks and Bloomingdales,” he observed. “But that channel of distribution is negatively affecting their own e-commerce.” The consumer isn’t going to pay more on your site and the retailers have been driving sales through markdowns.
“That’s a big factor—in order to have price integrity on your own site you need to negotiate out of friends and family and control the markdown cadence. Doing this while you are still dependent on the department store distribution is extremely challenging. We spend a lot of time navigating that,” he said. “In addition, you’re also competing with the department stores on search engine placement. That drives up customer acquisition costs. It’s not easy.”
Many companies may not be making money because they’re not managing inventory well, or have unusually high logistics costs. Though each company has specific nuances, issues often are quite similar, Herwitz said. “We spend quite a bit of time analyzing SKU productivity. Too many stock keeping units (SKUs), results in material inefficiencies ranging from not maximizing production negotiations, excess development, and number of pick faces required in the warehouse that drives shipping costs and poor inventory management. We find in most companies 25 percent of the SKU’s account for 75 percent of revenues,” Herwitz noted.
The difference between CoMetrics and other management consultants is an in-depth understanding of Finance, Operations and IT.
“Ownership may be investing in divisions that may not have direct contribution to G&A, or the Company is not even reporting by division. Their logistics costs could be inefficient. Their overhead could be too high,” Herwitz said. “We look at all of that.”
A unique aspect of CoMetrics is its technology platform to help companies manage their own supply chain management.
“When we founded CoMetrics, we realized that most of our clients were very sophisticated in how they were managing their retail partner supply chain,” using EDI [electronic data interchange] to achieve efficiencies,” Herwitz said. “But when it came to their suppliers, the process from issuing PO’s to the freight arriving in their warehouse was manual excel work.”
CoMetrics developed a proprietary technology product that interfaces with the importers ERP system that essentially reverses EDI into the supply chain without integrating with factories overseas. The system is state-of-the-art; however, many importers didn’t want to pay for it, accepting the status quo even though it was extremely inefficient.
“We found a great solution whereby we contributed the technology and formed a joint venture with All-Ways Forwarding,” Herwitz said. All-Ways is a full service logistics provider and one of the largest customs brokers in the Northeast. “Last year we moved 200,000 containers and with our technology the JV has revolutionized Cargo Management. We also have 1.5 million square feet across four 3PL facilitates we own, and accordingly offer complete end to end supply chain solutions. Use some or all of our services and you essentially get the supply chain software solution for no cost through All-Ways.”
For consumer product companies after product and payroll, inbound/outbound logistics is their third largest spend!
“Yet you’d be surprised at how many companies are not sophisticated in how to price and negotiate logistics,” Herwitz says. CEOs are delegating decisions to import managers who may not be achieving optimal results. “Through our cargo management platform, we generally can achieve savings of 10 to 15 percent.”
The company has offices across the world, with a data center in Shanghai with 35 people exclusively focusing on cargo management. Systematizing the entire process, from purchase order through shipment through receipt at the warehouse, not only makes the process more efficient, it also integrates with the general ledger and accounts payable and provides systematic landed cost calculations.
“And because we move more than 200,000 containers a year, we can be very competitive in costs,” Herwitz noted. “We drive the costs of the logistics down and the technology provides huge efficiencies.”
“We learned a lot about software development when we built the logistic platform,” Herwitz said. “We are now developing a financial business intelligence application scheduled to be unveiled in Q3 of 2017, which we think is going to be extremely impactful.”
The difference between CoMetrics and other management consultants is an in depth understanding of finance, operations and IT. “Quite frankly, most consulting firms are good at one or two of those” Herwitz said, “that’s what differentiates us.”