Creativity Inc. is a midsize wholesale arts and crafts distribution company based in Van Nuys, Calif. The company's roots stretch back to 1951, when Albert Deitsch founded Western Trimming Corp. to supply sequins and costume jewelry to the movie industry in and around Los Angeles. The family-owned enterprise grew over the next five decades, but the company steadily shifted more of its business toward the crafts industry, riding the wave of popularity of macramé, scrapbooking and other consumer craft trends. The family sold the business to an investment group in 2000, and the subsequent addition of three other craft companies in 2002 (Crop-In-Style, DMD and Blue Moon Beads) and one more company in 2005 (Autumn Leaves) resulted in the formation of Creativity Inc., which now is one of the top five U.S. suppliers in the general crafts sector.
As the company's business has changed, so too has Creativity's customer base, particularly over the last five years. "We have moved from serving the mom-and-pop, independent craft stores to serving the mass merchants that have gotten into arts and crafts products in a very big way," says Chris McLain, CEO of Creativity. The demands that the retailers such as Wal-Mart, Michaels, Target and Jo-Ann Stores put on a supplier like Creativity are considerably more stringent than those of the independents. "You need to have good systems in place, good processes and good procedures to interface with the mass merchants," explains McLain. "Likewise, they hold you to very high standards of fill rates and accuracy in your shipping."
Creativity has responded to these increased demands, as well as its continued growth, by implementing new technologies, such as an enterprise resource planning (ERP) system from Richmond Hill, Ontario-based CMS Software. The new ERP system went live in Creativity's Van Nuys facility in August 2004, followed by a company-wide rollout in early 2005. But even with the new system in place, Creativity was having difficulty meeting its customers' fill rate requirements, prompting the company to increase its inventory in an effort to avoid stock-outs. "I won't say our inventory levels were out of control," says McLain, "but they had reached levels that were disproportionate to the history of the company given the sales."
Looking for Help Outside
By early 2005 senior management and the board of directors at Creativity recognized that the company had to figure out how to better meet its customers' fill rate requirements while also optimizing — that is, reducing — inventory to sustainable levels that did not impose an excessive financial burden. At the same time, management felt that Creativity's very traditional purchasing function, which was handling both demand planning and procurement, did not have the skill set necessary to effect the changes that were needed to identify and fix the company's legacy processes. "I didn't think we had the expertise in-house, nor the time among our people to gain the expertise, to know what processes and procedures were appropriate for a 21st century purchasing function," says McLain.
After surveying its options, Creativity looked to ADR North America, an Ann Arbor, Mich.-based consultancy specializing in supply chain improvement and re-engineering, for assistance. The board invited ADR, in March 2005, to bring in a team to do a baseline study of Creativity and then present a base case, setting forth the "as-is" and a proposed "to-be" state for the company's supply chain. Bill Michels, CEO of ADR North America, brought two colleagues, senior consultants Jim Kiser and Dr. Laura Birou, out to Los Angeles to do the baseline. The three of them conducted separate interviews with executives and staff at various levels within the company and, somewhat to McLain's surprise, identified the critical issues within a day. "They were here literally for less than twenty-four hours before they came in and said they had seen enough to spot the main problems and, most importantly, identify the solution," McLain says.